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H&M Escalates Transformation Efforts After Profits Nosedive

H&M said “mistakes” led to a 34 percent drop in profit for the fourth quarter of 2017, totaling 4.87 billion Swedish krona ($618.78 million). Sales for the period slid by 4 percent to 58.481 billion SEK ($7.43 million).

Full year profits sank 13 percent to 20.81 billion SEK ($2.64 billion).

Calling the year mixed, CEO Karl-Johan Persson said, even so, there are reasons for optimism as the fast fashion resource tries to transform to suit the demands of today’s market.

“Our online sales and our newer brands performed well but the weakness was in H&M’s physical stores where the changes in customer behaviour are being felt most strongly and footfall has reduced with more sales online,” Persson said during H&M’s earnings release.

To move the needle faster, H&M is undertaking three main courses of action. The company will focus on improving assortments overall as well as the customer experience in store. To make the shopping more convenient, it is also looking to boost its omnichannel capabilities with offerings like click and collect and online returns in store.

H&M said it is also focused on investing in a faster, more responsive supply chain. Data analytics will become an even more important part of the equation from assortment planning through sales. The company also sees innovation as a way forward, whether that’s developing better apps, and or a broader use of cloud technology.

To boost its lagging digital effort, H&M will continue to roll out new e-commerce platforms and collaborate with marketplaces like Tmall. Simultaneously, the company will open 390 stores in underserved markets and close 170 others.

H&M is also adding to its slate of brands with the Afound off-price concept, which will feature discounted apparel and lifestyle products from the company’s brands as well as others. Afound will launch in Sweden this year with a store in Stockholm where it will showcase seasonless apparel and limited release product.

The company will provide more details about its transformation efforts on Feb. 14 during its Capital Markets Day.