- Prachi Singh |
After witnessing a slump in Q4 sales and profit, the Hennes and Mauritz AB (H&M) has predicted higher earnings this fiscal year. Ahead of its Capital Markets Day, the company said in view of the ongoing shift in the industry and the H&M group’s ongoing transition work, 2018 is expected to remain challenging but there are good opportunities for a somewhat better result for the full year compared with the previous year.
H&M’s sales in comparable stores are expected to remain negative with a gradual improvement during the year. A tough start with high opening stock levels from Q4 2017 and imbalances in the product range, the company added, are resulting in high markdown costs, with a negative effect on earnings at the start of the year. However, the online and new business sales are expected to increase by at least 25 percent and sales in newly opened stores are expected to add approximately 4 percent to group sales in 2018.
H&M predicts per year sales growth of 25 percent
Sales for new business, H&M added, are expected to continue to increase by at least 25 percent per year, thus reaching over 50 billion Swedish krona (6.2 billion dollars) in 2022. Online sales for the H&M group are expected to continue to increase strongly by around 20 percent per year to reach 75 billion Swedish krona (9.3 billion dollars) in 2022. Sales in newly opened stores are expected to increase sales for the H&M group by approximately 1-3 percent per year.
While the ongoing shift from physical stores to online is expected to continue, H&M expects as the group’s transition work and initiatives take effect, the physical stores will return to comparable positive sales development from 2019 onwards, leading to good increases in profit.
H&M banks upon sales growth of online channel
Online sales at H&M amounted to 29 billion Swedish krona (3.6 billion dollars), 12.5 percent of the total group sales. The company added that the group’s online channel is showing good profitability and accounted for 22 percent of the H&M group’s operating profit.
Sales of new business, that includes the company’s newer brands COS, Weekday, Cheap Monday, Monki, H&M Home, & Other Stories and Arket, amounted to 17 billion Swedish krona (2.1 billion dollars), 7 percent of the H&M group’s total sales. The company added that newly opened stores have very good terms and flexibility and the average payback period for new stores is less than 17 months.