H&M is going through a period of transformation to make the company even more customer-driven, efficient and flexible. This includes necessary transitions to new logistics systems that will allow even better availability, speed and transparency. However, sales and profits were temporarily affected by interruptions in connection with such transitions carried out in the second quarter in major markets such as the US, France, Italy and Belgium.
"The rapid transformation of the fashion retail sector continues, and we are in a transitional period that is both exciting and challenging. It is challenging because it is complex, extensive and the pace of change is fast and exciting as we can see positive trends and big potential in connection with our improvement work and investments," said Karl-Johan Persson, CEO.
"As we signalled previously, it was going to be a tough first half-year. We went into the second quarter carrying too much stock and we still had some imbalances in the H&M assortment – something that we are gradually correcting. As part of our transformation work we are transitioning our logistics systems to make our supply chain even faster, more flexible and more efficient. These transitions are complicated and can result in temporary interruptions, as unfortunately occurred during the second quarter in some of our major sales markets. This negatively impacted sales in the US, France, Italy and Belgium, as well as online sales in the Nordic region," Persson explained.
In 2018, the company plans to open around 390 stores and to close 150, resulting in a net addition of 240 new stores for the year. Most of the H&M store openings will be in emerging markets, while the closures will take place in established markets. Stores for the newer brands will open in its established markets.
"Yet in a number of markets sales developed positively in Sweden, Norway, Denmark and Eastern Europe we grew considerably faster than the market. This shows that we are on the right track and that our digital investments and improvement work are starting to have results. Overall, however, total sales for the quarter were not satisfactory, which meant that inventory levels were still too high at the end of the period," according to Persson.
"We can see that things are moving in the right direction, even though many challenges remain and there is a lot of hard work still to do. The first half of the year has been somewhat more challenging than we initially thought, but we believe that there is a gradual improvement and that we will see a stronger second half. We have a long-term approach and are optimistic about the future for the whole of the H&M group, with good growth in both sales and profitability for many years to come," H&M said in a press release. (RR)
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