STOCKHOLM – Swedish fast fashion giant H&M is sat on US$4.1bn of unsold stock, with inventories up 12 per cent over 12 months. The annual report of the world’s second largest fashion retailer shows pre-tax profit from September through November shrank for the sixth straight quarter to 4.4 billion crowns (US$482m) on a year-on-year basis. Mark downs were up 0.6 per cent year-on-year while inventories of 12 per cent represented an alarming 18 per cent of sales in H&M’s fiscal fourth quarter. The business had said in autumn it did not expect mark-downs to grow in the quarter.
Among other things, H&M blamed costs from replacing logistics systems — which also weighed on profits in the third quarter — as well as “activities in preparation for upcoming transitions” for lacklustre results. The growing threat of online only retailers plus, of course, Amazon are also hitting the company hard at the present time.
Said H&M CEO Karl-Johan Persso: “Against a backdrop of rapid changes in the fashion industry, in 2018 we accelerated our transformation to future proof our business, ending a challenging year for the H&M Group and the sector with strong signals that we are on track. While this performance is still some way off the targets that we set at the beginning of 2018, these positive signals confirm we’re making progress across all our strategic focus areas.”
None of the above results come as a huge surprise – it is common knowledge that H&M has been grappling with logistics challenges while looking to manage the migration from offline to digital. Online only operators are creating challenges for the whole fashion industry, not just H&M.
However, at a time when the issue of sustainability and unsold stock is so high on the agenda, sitting on more than US$4.1bn of unsold stock is not a good look for any apparel business and, given the furore over this exact same issue last year, one is left wondering why it has still not been tackled.
H&M results: brief
- The H&M group’s net sales increased 5 per cent over the full year
- Online sales increased by 22 per cent and now make up 14 per cent of total sales
- Gross profit margin was 53 per cent