The H&M group has cautioned that prices may rise and products be delayed into the UK as a result of Brexit, but investment and growth in the country remains undeterred.
Nils Vinge, head of investor relations for the H&M group, told Drapers that uncertainties around Brexit were “unfortunate”, and could potentially impact the group’s operations in the country.
“We are following developments with Brexit closely,” he said. “It puts a lot of uncertainty into the market, which is not good. There’s a risk that prices will increase and we are also aware of the potential risk of product delays. Of course, we hope it won’t happen but we’re following developments very closely.”
He stressed, however, that the UK remained a key market, and is one of the top 10 markets for the group. He flagged the imminent opening of an new automated logistics hub in Milton Keynes, as well as continuing store roll outs for brands such as Weekday and & Other stories, as indications of continued growth in the country.
Last month, it was revealed that profits after tax at H&M’s UK arm dropped by 74% to £7.5m for the year to 30 November 2018.
Vinge was speaking as the H&M group announced that net sales had risen by 11% to SEK171,061m (£14bn) in the nine months to 31 August 2019.
Profit after financial items grew by 6% to SEK11,988m (£987m) and gross profit increased 11% to SEK89,166m (£7.3bn) for the period.
The results come following a challenging period for the Swedish retail group which runs Cos, Weekday, & Other Stories, Arket and Monki, in addition to the flagship H&M brand. Vinge noted that the business’ “transformation” strategy was beginning to pay off.
“The whole industry has undergone a huge transition and disruption. Just like every retailer, we have to adjust. We’ve been profit making and continuing to invest, but the share prices have been down because we haven’t had as higher margins as we did in the past,” he explained. “We’re very much on track, we have a strong business and customers across the globe. We continue to adjust to this new environment, with a competitive landscape, new tech and a customer that is ever changing in their demands.”
Vinge reiterated that a focus on product and investment in operations were partly responsible for H&M’s growth. “There has been a renewed focus on hitting the sweet spot in fashion of quality, price and sustainability. We see that when this happens, customers appreciate it and it gives us the confidence to continue,” he says. “At the same time, we’re investing a lot in enablers, such as supply chain, to be faster, more flexible and efficient. We are also investing a lot in digital, data and AI.”
Despite H&M’s strengthening position, the continuing market uncertainties remain a pressing challenge for the group, and Vinge stressed the importance of agility for retailers hoping to survive. “Retail is changing very fast and everybody needs to adjust,” he said. “The whole industry is shifting and struggling, we see our peers that have difficulties – filing for chapter 11 bankruptcy protection and so on. That actually adds competition for us in the short run as there are a lot of markdowns.”
He continued: “We are in the middle of this transformation and we are definitely on the right path. We are taking it step by step with everything and our customer is appreciating that more and more.”