Hennes & Mauritz AB has reported a 44 percent drop in first-quarter profit, weighed down by discounts and slow sales, and said the start of its year of transition has been tough.
Profit for the period ending Feb. 28 was 1.37 billion Swedish kronor, or $170 million, compared with 2.46 billion kronor a year ago.
“The weak sales development, combined with substantial markdowns, had a significant negative impact on results in the first quarter,” Karl-Johan Persson, CEO of the Swedish fast-fashion retailer, said in a statement, noting that cold weather had adversely affected sales of spring clothing.
Still, Persson sought to strike a positive note, saying H&M’s efforts to change the business are “giving good indications and results” even if they haven’t reached enough scale to have a broader affect.
H&M, which has been struggling to catch up in the digital sphere, said that its new online store in India, which it launched in mid-March, is off to a good start and that the launch of H&M and H&M Home brands on T-Mall in China, also this month, had exceeded expectations.
The company said, as well, it will launch a new discount retailer Afound this year, selling both its own brands and others.
H&M added that three new automated logistics centers will be implemented this year, cutting down lead times.
Company sales for the period were down 1.7 percent to 46.18 billion kronor. H&M projected that sales online and from new businesses will grow by more than 25 percent this year, leading to “a somewhat better result for full-year 2018, compared with the previous year.”