H&M profits fall as it admits digital mistakes

H&M reported disappointing full-year financials as sales increased 4%, but profits tumbled.

Profits for the year ending 30 November 2017 fell 13% to 16.2 billion Swedish krona (£1.5 billion), as the retailer admitted a weakness in its physical store footprint, due to more customers choosing to shop online.

H&M CEO, Karl-Johan Persson, admitted the retailer has “made some mistakes” that have slowed down the business.

Despite a net addition of 427 new stores in 2017, Persson pointed to reduced footfall, as customers are changing their behaviour by shopping more frequently online.

“Our physical stores must offer a more inspiring and convenient customer experience, and be more customised to local needs,” he said while detailing three areas the retailer must focus on to accelerate its digital transformation going forward.

“The digital store is a process that should never settle. The offering needs to be constantly improved and broadened to ensure it maximizes engagement and sales,” he added.

H&M said the retailer will be rolling out digital initiatives such as Scan and Buy to better integrate the online and physical store. The retailer also plans to invest more in its supply chain to be even more responsive to consumer needs.

As well as investment in analytics and intelligence, H&M also plans to invest in its underlying technology to improve its platforms, develop consumer-facing apps and broaden the use of tech like the cloud, RFID and 3D.

H&M also plans to launch on the Tmall marketplace in China this year.

“All in all, we feel 2017 was a year where we made more steps forward and did more groundwork for the future, but we have also made some mistakes that have slowed us down,” said Persson. “The industry changes are challenging everyone and this will continue in 2018. The new fashion landscape requires skills and resources to adapt and seize the new opportunities. In particular the ability to take a long-term view and to navigate through some inevitable turbulence. By [making] long-term investments, we have built a solid platform for many years of continued growth.”

Perry Krug, principal architect at Couchbase, which has aided retailers like Tommy Hilfiger through digital transformation projects, said H&M needs to start innovating quickly.

“One of the factors that finally crippled Jaeger in 2017 was that its digital transformation was too little, and far too late,” he said.

“Consumers are spoilt for choice by digital services, and their expectations have risen to match. To succeed, businesses need to remember that the customer or end user is the ultimate goal of any transformation – without an experience that engages the customer, the project will be a failure.”

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