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H&M: ‘Turnaround plan is working’

H&M group’s turnaround plan is starting to bear fruit following investment in product and online capabilities, head of investor relations Nils Vinge has told Drapers.

H&M, owner of brands including H&M, Cos, & Other Stories and Weekday, had a 5% increase in net sales to SEK 210.4bn (£17.73bn) for the year to 30 November 2018, but profits after financial items fell by 28% to SEK 15.64bn (£1.32bn). Growth was driven by online sales, which were up 22% to SEK 30bn (£2.53bn) and now comprise 14.5% of the group’s total.

Online growth was underpinned by heavy investments in logistics during the three months to 30 November, when three new fulfilment centres opened. 

“A year ago we made the move to regenerate the H&M brand and we are beginning to see the results of that,” said Vinge. “Our customers are buying full price and we had fewer markdowns. Customers are reacting well to the changes we are making. We understand our customers. We are developing fashion for them, at the best quality and price, sustainably.”

Following reduced discounting during the financial year, markdowns for the first quarter of 2019 are expected to be approximately 1 percentage point lower than during the same period in 2018. 

Vinge would not be drawn on when the business would return to profit growth: “It is impossible to say when we will be back in profit in such a disruptive market, but we are on the right track. We have the confidence to accelerate our plans. We have a long-term view to increase our speed to market, keep our customers happy and drive profitability.”

UK sales for the year were up 8% year on year, driven by an 38% increase in online sales. In-store sales dropped 1% on the previous year.

During the year H&M opened 25 new stores and closed 13 in the UK. Vinge said the retailer is continuing to assess its store estate in the UK, and globally.

“We are undergoing a store optimisation programme to find the right mix of stores: some will open, some will close, some will change to another banner/ fascia. The UK is an important market – one of our top 10 globally. Online growth is only possible because of the stores and the brand awareness.”

He added that prices may increase in the UK if there is a no-deal Brexit: “We won’t be the first retailer to increase prices in the UK, if there is no deal. We will follow the market and our competitors closely, and adjust prices if needed.

“It’s too bad for shoppers. If import barriers are put up customers will pay more. We have a Brexit plan and we are following developments very closely. It is a pity it is happening. We like the UK and the UK needs us – it is a mutual relationship.”

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