H&M profit surprise lifts shares, to review store mix

[STOCKHOLM] Fashion retailer H&M surprised investors with a small increase in quarterly profit and said it would review its mix of stores and invest more in e-commerce, lifting its shares to a one-month high.

The world's No 2 apparel group after Zara owner Inditex said it was reviewing its store portfolio and around 70 to 80 of new stores this year would be brands other than H&M.

This brings it more in line with Inditex, which has been outperforming the Swedish group. Zara, the Spanish firm's biggest chain, accounts for less than four in 10 of its stores.

Inditex also has a model that enables it to respond faster to changes in demand. H&M said it was investing in technology, automation and analytics to speed up its own supply chain.

H&M said on Tuesday it would roll out e-commerce in six more markets this year, taking it online in 41 of the 69 it is present in. It is also replacing a decades-old store growth target with a turnover target to reflect growing e-commerce.

It is now aiming for annual local-currency sales growth, including online sales, of 10-15 per cent, and it expects to be within range from this year on. In the fiscal year 2015/16, local-currency sales were up seven per cent.

H&M said it would open 430 new stores this year, a 10 per cent store growth compared with 11 per cent in the past year. It branched out into seven separate concepts in recent years to broaden its customer base in the face of tougher competition, and plans to launch one or two more this year.

Analysts have criticised H&M for not offering services such as picking up items bought online in its stores and the company responded on Tuesday by saying it was testing online returns in stores, click-and-collect and faster delivery options.

The group, whose profits have fallen for five straight quarters said its fiscal fourth-quarter pretax profit rose to 7.4 billion Krona (S$1.202 billion) from 7.2 billion a year-ago .

Analysts polled by Reuters had on average forecast a two per cent drop to 7 billion krona.

H&M, which had previously reported a weaker than-expected turnover for the quarter, as well as for December, said sales for the period Jan 1 to Jan 29 were up 11 per cent in local currencies.

REUTERS