Net profit at Swedish group H&M has gone down by 21.8 % in 2018: "due to logistical expenses", the chain says. Nevertheless, the investments seem to be fruitful as turnover has already increased by 5.2 %.
Third year in a row with lower profits
For the third consecutive year, H&M's profitability has decreased: while turnover increased by 5.2 %, net profit plummeted by at least 21.8 % to 12.65 billion Swedish crowns (1.2 billion euros). Gross profits shrank by a modest 11 %.
It was a challenging year for the H&M group, according to CEO Karl-Johan Persson, but after the difficult first half, there may be signs that the company's transformation efforts will turn out fruitful. "Improved collections generated better full-price sales and lower markdowns towards the end of the year. This gave us confidence to accelerate our transformation plans in the fourth quarter with a particular focus on the upgrade of our logistics systems."
Investments in logistics and data
Therefore, the top executive believes that an increase in expenses was unavoidable. While the goals for 2018 have not been met, improvement can be seen in all core domains. H&M opened three new distribution centres in the fourth quarter, covering a total of 230,000 sqm. It was also announced that the group will be hiring Cambridge Analytica expert Christopher Wylie to help with data and artificial intelligence.
Net profits increased last year (until the end of November) by 5.2 % to 210.4 billion Swedish crowns (20.3 billion euros). Online turnover went up by 22 %, raising e-commerce to 14.5 % of the total turnover. A new global e-commerce platform was also set up, of which former standalone brand Nyden is now also a part.
In 2019, H&M expects the opening of 175 new stores, almost half of which will represent the group's newer brands - such as Arket and Weekday. The group will tread onto the Mexican and Egyptian markets this year through franchising. Online and offline sales will become more integrated as new webshops will be deployed.