// H&M’s UK division saw a 71.2% crash in full-year pre-tax profits to £10.72m
// Fashion giant’s UK operating profit plummeted 68.4% to £12.21m
// Overall UK revenue slipped 0.75% year-on-year, but in-store turnover grew 2%
H&M has revealed a massive drop in profits in its UK arm, but insisted the business performed well given the tough trading conditions affecting the retail industry as a whole.
According to accounts filed at Companies House on Friday, H&M saw pre-tax profit for the financial year ending November 30, 2018, plunge from £37.3 million to £10.72 million.
This equates to a year-on-year drop of 71.2 per cent.
The Swedish fashion giant’s operating profit in the UK for the same full-year period also plummeted – from £38.71 million down to £12.21 million, or a 68.4 per cent year-on-year decline.
While H&M’s overall revenue in the UK slipped a marginal 0.75 per cent year-on-year from £1.06 billion to £1.05 billion, H&M said in-store sales increased 0.2 per cent.
In addition, gross margin grew from 52.1 per cent in 2017 to 53.3 per cent in 2018.
H&M’s UK gross profit increased 1.5 per cent to £561.76 million, but net profit crashed 74.3 per cent year-on-year to £7.48 million.
The fashion retailer attributed this to charges of £9.02 million for “onerous leasing provisions” as well as a reduction of other operating income from parent company H&M Group of £11.53 million from 2017.
As of November 30 last year, H&M was operating 304 stores in the UK after opening 23 new stores and closing 12 others.
The new stores was also a driving factor in its UK staff count, growing from 7357 in 2017 to 7852 in 2018.
For the current financial year, H&M said it only planned to open three new stores.
In the director’s report, H&M said the company was “well placed” to managed its business risks and that it has “considerable financial resources” due to being consistently profit-making in recent years.
The trading update comes amid reports that H&M entered a brawl with landlords after demanding terms that meant property owners would have to bear the cost of the increased number of returned clothes.
The fashion retailer is reportedly offering landlords “total occupational deals” where they discuss with landlords a sum linked to the amount of sales the store makes and leaving them to divide it between service charge, rent and business rates.