H&M keeps transforming: profit down 41% but sales up 10%

H&M continues the transformation of its business and, along with it, its accounts. The Swedish company, number two in the world of fashion distribution only behind Inditex, has closed the first quarter of the fiscal year with a drop of 41.47% in its net result compared to the same period of the last fiscal year. Meanwhile, the group’s sales rose by 10.47%.

Between December and February, the company registered a net result of 803 million Swedish crowns (76.8 million euros), compared to the 1.37 million SEK (131.3 million euros) from the first quarter of 2018. According to the company, it has to be taken into account that the net result in the first quarter of 2018 recorded a good performance and increased by 399 million SEK due to the tax reform that was approved in the United States.

H&M’s operating result, on the other hand, also stood downwards at the end of the period. The group registered 1 billion SEK (96.2 million euros), 16.8% less compared to the 1.2 billion SEK (115.6 million euros) from the first quarter of 2018.

This setback is, however, lower than the expected, since the group managed to improve its margins and increased the percentage of sales without discount. The company has already accumulated several quarters registering low operating results. The gross margin of the company stood at the end of the first quarter in 50%, compared to 49.9% in the three first months of 2018.

“H&M managed to improve its margins and increased the percentage of sales without discount”

“Our transformation work has contributed to release better collections with an increase of sales at full price, fewer discounts and an increase of market shares,” pointed out Karl-Johan Persson, CEO at H&M.

In the three first months of 2019, H&M registered sales valued in 51.01 billion SEK (4.88 billion euros). That figure represents an increase of 10.47%, in contrast to the 46.18 (4.41 billion euros) from the first quarter of 2018.

Throughout the first quarter, the group, including franchises, opened 26 points of sale (compared to 32 openings in the previous year) and closed 36, compared to 34 in the first quarter of 2018. Out of the total openings, three were franchises; out of the closings, another three had this format.

H&M concluded the first three months of fiscal year 2019 with 4,958 points of sale, in comparison to the 4,743 of the previous year. As of February 28, H&M totaled 255 stores through franchises.

In Europe, the group has 3,055 points of sale, while in Asia and Oceania it has 1.159 stores and North and South America, 744. The H&M chain is by far the largest group, with a total of 4,420 points of sale, followed by Cos (272), Monki (127), Weekday (38), &Other Stories (69), Arket (18), Afound (6) and H&M Home (8).

As the company announced, it plans to close the chain Cheap Monday in 2019, as a result of the strategy that focuses on its main chains. Cheap Monday has a distribution model based on the multi-brand channel.