H&M sales beat Predicted expectations
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First-quarter H&M sales have exceeded expectations, with the company improving both profit and margin, proof that the fast-fashion company’s turnaround strategy is working.
H&M sales rose by 42 per cent in India and 16 per cent in China, in local currencies. The company said both online and offline performance improved in many markets.
The global retailer’s pre-tax profit was 1.04 billion Swedish crowns (US$112.25 billion) for the quarter to February 28, less than the 1.26 billion Swedish crowns it posted in the previous corresponding period. But this was well ahead of the 708 million that analysts had been expecting.
Gross margin was 50.0 per cent, up from 49.9 per cent in the previous corresponding period, while analysts had been anticipating a fall to 49.4 per cent.
H&M said this was the result of ongoing improvements in buying and logistics, which led to a 1.5 percentage point reduction in the markdowns in relation to sales, compared to the corresponding quarter the previous year.
“Our ongoing transformation work has contributed to stronger collections with increased full-price sales, lower markdowns and increased market shares,” Karl-Johan Persson, H&M’s CEO, said in a statement accompanying the results.
H&M has also been working to improve its online offering by launching e-commerce sites in new markets, integrating digital and physical stores and providing faster delivery options. The retailer also said it will shortly launch an upgraded loyalty program, which has 35 million members.
“The retailer also said it will shortly launch an upgraded loyalty program, which has 35 million members.”
Today, H&M is available online in 47 markets, and Mexico and Egypt will be added in 2019. It will launch on Myntra and Jabong, India’s largest e-commerce marketplaces, later this year.
H&M said it plans to add 175 net new stores to its network this year. Most of these stores will open in growing markets, while the number of stores in Europe is expected to reduce by 50.
“The rapid transformation of fashion retail continues and we can see that our own transformation work is taking us in the right direction, even if many challenges remain and there is still hard work to do,” Persson said.
“The progress we have made in our strategic focus areas confirms that we are on the right track. Therefore we continue moving forward at full speed and we are optimistic about the future for the H&M group.”
H&M’s strategic focus areas include:
- Creating the best customer offering.
- Fast, efficient flexible product flow in the supply chain, including initiatives within advanced data analytics and AI.
- Continued investment in the tech foundation, including scalable and robust platforms to enable faster development of new apps and technologies.
- Digital expansion into new markets.
Questions & Answers
Q.Which specific geographical markets saw significant sales growth for H&M?
Which specific geographical markets saw significant sales growth for H&M?
H&M reported a 42 per cent sales increase in India and a 16 per cent rise in China, both measured in local currencies. The company also noted improved performance online and offline in many other markets globally.
Q.How did H&M improve its profit margin despite a lower pre-tax profit compared to the previous year?
How did H&M improve its profit margin despite a lower pre-tax profit compared to the previous year?
H&M's gross margin increased to 50.0 per cent, up from 49.9 per cent. This improvement was attributed to ongoing enhancements in buying and logistics, which led to a 1.5 percentage point reduction in markdowns relative to sales.
Q.What are H&M's plans for expanding its store network and digital presence this year?
What are H&M's plans for expanding its store network and digital presence this year?
H&M plans to add 175 net new stores, primarily in growing markets, while reducing European stores by 50. Digitally, it will launch e-commerce in Mexico and Egypt in 2019 and on Myntra and Jabong in India later this year.
Q.What is H&M's strategy to enhance customer loyalty and digital offerings?
What is H&M's strategy to enhance customer loyalty and digital offerings?
H&M will shortly launch an upgraded loyalty program for its 35 million members. It is also expanding online by launching e-commerce sites in new markets, integrating digital and physical stores, and providing faster delivery options.