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H&M to Open Fewer New Stores as it Focuses on Digital Investments

H&M Group will open fewer stores as it shifts its investment focus to digital, and it is looking at developing new concepts and business models.

The company made the disclosure on Thursday when it reported its first-half earnings results for the period ended May 31, saying it’s “accelerating its adaptation to customers’ changed shopping patterns and has therefore revised the number of new stores downwards in favor of even more digital investments.” The change means the net addition of new stores for the full-year 2019 is now 130—45 stores fewer than originally planned.

H&M CEO Karl-Johan Persson, said tech-focused investments will allow the company to create “robust scalable platforms” for customer apps and new technologies. He added that H&M Group plans to make its supply chain “even faster, more flexible and more efficient.” Also on the agenda is the development of new concepts and business models, according to the CEO, who did not elaborate further on those plans.

The company said in its earnings release that Thailand, Indonesia and Egypt will become new H&M online markets through franchises during the second half of 2019. In autumn of this year, H&M will launch on India’s largest e-commerce platform Myntra, and in China H&M’s & Other Stories concept will open on Tmall. This past April, the company opened an online presence in Mexico.

While the firm’s new online platform and logistics systems haven’t yet achieved full efficiency, customers have benefited from the improvements, which include, according to Persson, “faster and more flexible deliveries and a more seamless shopping experience.” And during the past spring, the company “substantially expanded H&M’s customer loyalty program, which now has more than 43 million members,” he added.

H&M has been working to improve the customer experience in its stores, which means greater integration between its online and offline channels. Some initiatives have included the option of digital store receipts in the H&M app, available in the U.S. and U.K. this summer and rolled out to other markets this autumn; next-day delivery in 12 markets; find-in-store using a mobile device to search for size availability and store, which is now an option in 20 markets; online returns at the store in 15 markets; and a notify-if-back service is available for products in both stores and online.

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Those improvements have helped inventory levels, as well as the expectations of reductions in markdown costs in the third quarter versus a year ago. H&M said sales of the summer collection “got off to a very good start. Net sales in the month of June are estimated to increase by 12 percent in local currencies” versus a year-ago.

“Our transformation work in response to the rapid shift in fashion retail is continuing at full speed. While the costs of this have held back profitability in the short term, we remain convinced that our focus on meeting customers’ increased expectations will contribute to a gradual increase in profitability and to long-term positive development for the H&M Group,” Persson said.