Multinational clothing retail company H&M has proved its transformation plan effective, reporting an increase in group net sales of 12.1% to SEK 62,527m (£5,512m) in its third-quarter results ending the 31 August 2019.
Its move towards focusing more on digital retail than the physical has seen UK sales rise by 3.5% and group operating profit increase by 26.5%.
Online sales also increased by 30% in SEK and by 25% in local currencies, with gross profit increasing by 13% to SEK 31,815 m corresponding to a gross margin of 50.8%.
Profit after tax increased to SEK 3,859m; this corresponds to SEK 2.33 per share.
The retailer is expecting to open around 120 net new stores this year, a further on the 175 stores that were originally planned as its main priority remains expansion in growth markets.
H&M CEO Karl-Johan Persson said: “Well-received summer collections and increased market share show that we are on the right track with our transformation work to meet customers’ ever-increasing expectations. The continued development of more full-price sales and reduced markdowns contributed to a 26% increase in operating profit in the third quarter, all while maintaining a high level of activity in our transformation work.”
GlobalData lead retail analyst Kate Ormrod said: “2019 has not been without its challenges, however, especially in the UK, and while it remains under pressure from value rivals as well as more frequent discounting from midmarket players, H&M’s proposition continues to resonate. Investment in its supply chain, and the plan to open a new logistics centre in Milton Keynes this autumn will aid product availability and speed – crucial for those in the fast fashion segment.
“Its longstanding commitment to sustainability sets it apart from other value players and with new initiatives such as green home delivery (for example via cars that run on biogas) in the Netherlands and trialling clothing rental in Stockholm in the autumn, H&M has found its niche which it can continue to exploit as consumer focus on sustainability grows.”