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Abu Dhabi, UAETuesday 19 June 2018

H&M gets thumbs down from investors as profits tumble

Operating earnings fell 14 per cent in the 12 months through November, the biggest drop in six years

An H&M store in central Moscow, Russia. Maxim Shemetov /Reuters
An H&M store in central Moscow, Russia. Maxim Shemetov /Reuters

Shares in H&M got a dressing down on Wednesday as disappointed investors sold them in reaction to threadbare earnings and holes in the Swedish fashion retailer's online strategy.

Reporting a 13 per cent drop in its net profit for the 12 months to November, H&M said its bricks-and-mortar stores were fast losing customers while it struggled to boost its online sales to make up for the shortfall, Agence France-Presse said. .

H&M’s operating profit fell 14 per cent to 20.6 billion Swedish kroner (Dh9.64bn) in the 12 months through November, the biggest drop in six years.

The company's shares were down by nearly 7 per cent in mid-session business on the Stockholm stock exchange, taking their decline over the past 12 months to just under 42 per cent.

The shares fell as much as 9.1 per cent to a nine-year low on Wednesday in Stockholm. They have lost more than a quarter of their value in the past three months. The slump brings H&M’s market value to 235bn kroner, equivalent to about a quarter of what Zara owner Inditex is worth, according to Bloomberg.

"Our performance during 2017 was mixed, with progress in some areas but also difficulties in others," said the chief executive Karl-Johan Persson, adding that sales growth was "clearly below our expectations".

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Mr Persson said his company's performance had to be "seen in the wider context of the transformation that the industry is going through", but admitted that it needed "to accelerate" its coping strategy, AFP reported.

"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," he said.

H&M's product mix also contributed to the weaker result, he said.

Sales dropped in Germany, the company's biggest market, Britain and the Netherlands, but rose in its number two market the United States, as well as in France, China and Sweden.

The Swedish company runs 4,500 physical outlets across the world and plans to open 390 stores more and close 170.