H&M’s profits hit as fashion chain struggles to shift stock
The group owns a host of brands including Cos, Monki, Weekday and Cheap Monday
H&M’s profits slumped in the six months to May 31 as it struggled to shift stock, with sales remaining broadly flat.
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The group’s profit after tax fell from 8.35 billion Swedish krona (£701 million) to 6.01 billion Swedish krona (£510 million), a drop of 28%.
Sales for the six months, excluding VAT, came in at 98.37 billion Swedish krona (£8.36 billion).
H&M group, which comprises a suite of brands including Cos, Weekday and Monki, has been setting up a new logistics system to allow it to get product to its stores faster, but said the transition had caused problems in some major markets.
Chief executive Karl-Johan Persson said: “As we signalled previously, it was going to be a tough first half-year.
“We went into the second quarter carrying too much stock and we still had some imbalances in the H&M assortment – something that we are gradually correcting.
“As part of our transformation work we are transitioning our logistics systems to make our supply chain even faster, more flexible and more efficient.”
Analysts at Jefferies said the results showed the challenge facing the retailer as it moved back to a full-price sales model.
“Prospects for the shares over the balance of the year are inevitably dictated by progress in full-price sales,” the analysts said.
“We would have hoped for more encouraging news on inventory levels, after such a protracted reinvestment into mark-downs.”