After a Period of Softness, Has H&M Hit Its Stride?

Amid a challenging retail climate, H&M Group’s efforts to reposition itself appear to be paying off. The Swedish-based company posted a solid preliminary fourth-quarter earnings report today amid a positively received autumn collection and improved online sales.

The report seemingly points to success amid a strategic shift by the fast-fashion giant, which has worked to integrate its physical and online channels, upgrade its supply chain and reduce markdowns, according to CEO Karl-Johan Persson.

As it improves its digital offerings, H&M projects gains of 20% or better in online sales on a yearly basis for the next two years. The firm won’t report its e-comm numbers for Q4 until January but it already saw a 30% bump in Q3, reported in October.

Insiders have also said that improved product offerings have helped drive H&M’s renewed success, with the retailer reporting its first quarterly earnings gains in two years for Q3. In H&M’s third quarter call, Persson said Q4 was off to “a promising start with a positive reception for our early autumn collections,” although he added that it was too early to make full quarter projections at that time.

Additionally, the teen-mall staple said its ongoing work to improve full-price sales and lean on fewer markdowns is paying off and that it has also seen a reduction in inventory overload.

In today’s preliminary report for Q4, or the period ended Nov. 30, H&M reported a net sales increase of 9% to 61.7 billion Swedish krona ($6.59 billion). For the full fiscal year, the retailer’s net sales grew 11% to 232,764 million krona ($24.84 billion), according to the preliminary numbers.

H&M’s solid numbers come following a strong Q3 report posted by competitor Inditex, parent to Zara, earlier this month. Inditex, which like H&M is pursuing stronger online sales, recorded a 14% rise in third-quarter net income.

H&M expects online sales for Black Friday, which are not all included in the Q4 report due to the lateness of the holiday, to equal around 500 million krona ($53.39 million). The full year report will publish on Jan. 30, 2020.

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