H&M group has recorded a fall in profits in the year to 30 November 2017, as it gears up to launch off-price business Afound.
Operating profit at H&M dropped by 13% to SEK 20.6bn (£1.85bn) during the period, while profit for the period fell by 12.9% to SEK 16.2bn (£1.45bn).
However, gross profit rose to SEK 108.1bn (£9.76bn), up 1.8%. Sales including VAT grew by 4% to SEK to SEK 232bn (£20.8bn)
CEO Karl-Johan Persson said: ”We feel 2017 was a year where we made more steps forward and did more groundwork for the future, but we have also made some mistakes that have slowed us down. The industry changes are challenging everyone and this will continue in 2018. The new fashion landscape requires skills and resources to adapt and seize the new opportunities.”
He added: ”Our performance during 2017 was mixed, with progress in some areas but also difficulties in others. […] Our online sales and our newer brands performed well but the weakness was in H&M’s physical stores where the changes in customer behaviour are being felt most strongly and footfall has reduced with more sales online. In addition, some imbalances in certain aspects of the H&M brand’s assortment and composition also contributed to this weaker result.
”[Our] performance does need to be seen in the wider context of the transformation that the industry is going through. Underneath the disappointing recent performance, we see reasons for optimism and good learnings but we need to accelerate [our] transformation even more.”
The company also said it plans to close 170 stores this year and add a new concept called Afound, which will sell discounted menswear and womenswear.
Afound, which will stock both external and the H&M group’s own brands, will launch online and in physical stores in Sweden later this year. The first store will open on Drottninggatan in Stockholm.