Why H&M Will Close Stores As It Now Favors Online Growth


02 February, 2017

In the local currency, H&M sales in Romania grew 18% over the review period, the company said in its full-year financial report.

The Swedish group which owns the H&M, Cos, & Other Stores, Monki, Weekday and Cheap Monday brands achieved sales including Value-Added Tax of SEK 222,865m in the 12-month period, an increase of 7%. H&M said it was investing in technology, automation and analytics to speed up its own supply chain.

"H&M-branded physical stores didn't reach the goals", said H&M Chief Executive Karl-Johan Persson in an interview. The company is no longer targeting 10 percent to 15 percent growth in stores as it expands more in online sales.

H&M said it would open 430 new stores this year, a 10 percent store growth compared with 11 percent in the past year. For fashion retail in general, 2016 was at the same time a challenging year in which various external factors - including geopolitical events - had a negative impact on retail trade in many markets.

Furthermore Persson gave the reference to "geopolitical events" which he said had had a adverse bearing on the retail business, predominantly in France, Germany, Switzerland and Italy as well as the USA and China.

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"Mark-downs increased during the year due to a lower sales increase than planned".

H&M's 2016 turnover grew to 222.6 billion Swedish krona (23.6 billion euro), but despite that lovely growth, its post-tax profit dropped to 18.6 billion Swedish krona (2 billion euro). Its online expansion will also continue in 2017, with another 6 new markets.

On the Stockholm Stock Exchange, the group's shares surged almost five percent in early business, vastly outperforming the overall market which was up by 0.8 percent. In addition, H & M will add Malaysia, Mexico, Hong Kong, Macao, Singapore, Taiwan and Turkey to its online presence.

H&M said the local-market targets will allow it to account for both online and in-store sales.

H&M has branched into seven separate concepts in recent years to broaden its customer base in the face of tougher competition in the budget segment, and plans to launch one or two more this year, but around nine of 10 stores are still its main budget brand H&M.

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