H&M profits soar on global expansion, January sales strong, to launch new brands, shares jump
Lots and lots of positive news (and one hiccup) from Hennes & Mauritz Tuesday morning. The Swedish fast fashion retail giant’s voracious appetite for global expansion ensured Q4 earnings came in well above expectations. However, full-year earnings did fall, hit by wider costs.
Group sales for Q4 (ended November 30) and for January (1-29) also increased, the latter up 11% year-on-year in local currencies, despite a negative calendar effect of around 2 percentage points, it noted.
But importantly, H&M’s sales target for the year ahead is for growth of 10-15% “with continued high profitability”. It also hinted at launching “one or two new brands” in 2017, without giving details. Its shares were up 4.6% in very early trade.
H&M said net profit for the final quarter rose 7% to SEK5.91bn. Analysts had expected SEK5.42bn.
That was boosted by “very strong” expansion during the year, adding 427 new stores and 11 online markets to its vast roster now totaling 4,351 stores in 64 markets, plus 35 online markets.
Q4 sales, including value-added tax and converted into Swedish kronor, rose 8% to SEK61.1bn.
For the full-year, group sales including VAT increased 6% to SEK222.8bn. Net profit for the year slipped to SEK24bn from SEK27bn, hurt by increased markdowns and higher purchasing costs from the strengthened US dollar, it said.
For good measure there was also “strong sales growth” (both online and in stores) for sister brands COS (pictured left), & Other Stories, Monki, Weekday and H&M Home, although no details were given.
H&M also said Tuesday it had seen “a very good start” for H&M’s new markets, Cyprus and New Zealand, as well as for H&M’s latest online roll-outs in Canada and South Korea.
This fiscal year H&M group plans to open another 430 new stores including new markets Kazakhstan, Colombia, Iceland, Vietnam and Georgia. In addition, new online markets will include Turkey, Taiwan, Hong Kong, Macau, Singapore and Malaysia.
CEO Karl-Johan Persson called 2016 “an eventful year” which included “many positive things but also challenges for us as well as for the industry… The year was characterised by the shift in the industry towards an ever growing online market and by digitalisation.”
He noted: “We are very pleased that our online business developed very well for all our brands, both as regards sales and profitability.”
He added: “It is also positive that sales developed well for H&M in our well-established markets such as Sweden and the other Scandinavian countries and in Russia, Turkey and Canada, but also in our newer markets such as India, Australia, South Africa, Mexico, Chile and Peru.”
He also pointed out it had been a “challenging” year for fashion for many markets, affected by various external factors – including geopolitical events. He said this was “particularly visible in France, Germany, Switzerland and Italy as well as in the US and in China.
“Since these markets represent a large share of our sales, this consequently had a great impact on our overall sales development. However, during the year we also identified areas within our customer offering, store experience and supply chain where we could have done better and where we are now methodically ensuring improvements.”
He added: “In 2017 we are looking forward to delivering strong collections and customer experiences and launching one or two new brands. This, combined with the ongoing improvements and our investments in the omnichannel offering, the supply chain and advanced analytics make us positive towards our opportunities for reaching our newly rephrased growth target, both in 2017 and going forward.”