H&M shares are trading in the red Wednesday after the fashion retailer reported its quarterly profits shrank by around a third from a year earlier. H&M also said it is considering asking share holders to reinvest their dividends to support its own investment plans.
By 0935 BST, H&M shares were trading 6.33% lower at SEK146.00. H&M shares have been steadily declining for some three years. During that time, it has continued to invest in its overall group and bring new brands to customers.
H&M stores attract fewer shoppers
H&M’s results showed profits in the fourth quarter of 2018 fell 34% to SEK4.9 billion, from SEK7.4 billion in the fourth quarter of 2016. Meanwhile, full-year profits were 13% lower at SEK20.8 billion.
“Profit during the year was negatively affected by a weak sales development in the physical stores of the H&M brand,” H&M said in its earnings press release.
“This is mainly due to the ongoing shift in the industry, in which sales are increasingly taking place online but where the group’s online share does not yet compensate for the reduced footfall to stores.”
Other details showed total quarterly sales fell 4% in the fourth quarter. However, full year sales rose 4% in 2017, to SEK231.8 billion, from 2016’s SEK222.9 billion.
H&M to expand digital offerings
The Swedish-based fashion retailer said it wasn’t the only brand facing challenges from the changing way in which shoppers make their purchases. H&M also stated it planned to expand its online business.
“The industry changes are challenging everyone and this will continue in 2018,” said H&M CEO Karl-Johann Persson.
Persson confirmed in his statement that while H&M’s online sales performance during 2017 was strong, sales at the physical H&M stores disappointed and weighed on the overall figures.
Part of H&M’s plan going forward, is to accelerate its digital expansion.
“We will be broadening our assortments, rolling out digital to new markets and linking to new platforms, like Tmall for mainland China,” H&M’s statement said.