H&M reports a drop in profits

H&M has been expanding with great pace across New Zealand, but 2018 has not been particularly lucrative for the company. The brand reported a substantial drop in profits for the past year, ending in November.

The company cited massive investments across the board as a reason for their decrease in profits, as they have embarked on a large transformation project. Investments were focused on the brand's online sector including upgrades to their mobile app, improved delivery services and the implementation of a click-and-collect service. These expansions, as well as logistical adjustments, cost the company approximately 450 million Swedish Crowns, the equivalent of 72 million NZD in the final three months of the financial year alone.

Despite the decrease in profits, the Swedish brand has expressed its determination to continue with the company’s transformation, believing that their investments will pay off in the coming years. Chief executive Karl-Johan Persson spoke positively about the company’s future, and their recent upgrades. “In 2018 we accelerated our transformation to future proof our business, ending a challenging year for the H&M Group and the sector with strong signals that we are on track,” said Persson. “With the transformation now underway, capital expenditure will reduce in 2019 compared to 2018 and we will continue to shift the balance of our investments towards digital.”

While the brand experienced a fall in profits in 2018, there was an overall increase in full-year revenue of approximately five percent. This increase was driven by the company’s online sector, as online sales increased by 22 percent, making up 14.5 percent of the H&M’s total revenue for the financial year. This indicated to company executives that they were heading in the right direction. Persson expressed his confidence with their project following these reports. “These positive signals confirm we’re making progress across all our strategic focus areas: to create the best customer offering; a fast, efficient and flexible product flow; a stable, scalable tech foundation; and adding new growth through the store and online expansion.”

H&M is preparing to open its fifth store in New Zealand since first arriving here in 2016. The company is currently the second largest clothing retailer in the world, and as they continue to invest in significant expansions, it is likely we will see them develop further across the country.