H&M sees growth in online sales lifting earnings this year

A woman shops at an H&M store in New York City. The retailer is seeing a pickup in online sales. (Reuters)
Updated 14 February 2018
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H&M sees growth in online sales lifting earnings this year

STOCKHOLM: Sweden's H&M expects earnings to grow this year as rising online sales offset weakness in its physical stores, it said on Wednesday at its first ever day of investor briefings held to assuage concerns over future strategy.
Shares in the world's second-biggest fashion retailer reacted positively and were up 2.5 percent at 145.22 Swedish crowns by 0727 GMT, compared with a 0.7 percent firmer European retail sector.
The company, a rival globally to Zara-owner Inditex , forecast growth of at least 25 percent in online sales and in its new brands such as COS and H&M Home in 2018, but said sales from its existing stores would continue to fall, noting high stock levels.
H&M has in recent years seen sales growth stall as it struggles to keep up with shoppers moving online, and fend off competition in its core budget segment. Inditex has consistently outperformed its Swedish rival in that time, helped by having a faster and more flexible supply chain and by moving faster into e-commerce.
In a statement ahead of its capital markets day for analysts and investors, H&M said it expected a "somewhat better" result for the 2017/18 financial year.
Analyst John Hernander at Nordea, a top-ten H&M shareholder, said: "The market expects lower earnings for 2018, so if H&M instead delivers on its target of a somewhat higher profit and turns the negative estimate revision trend, the stock will also turn."
Shares in H&M, which is controlled by the Persson family, have slid for three straight years, shedding more than half their value from a record high in March 2015 amid mounting scepticism the company has a viable turnaround plan.
H&M said it expects online sales to reach 75 billion crowns ($9.4 billion) in 2022, up from 29 billion in 2016/17, and new brands to achieve sales of 50 billion in 2022, up from 17 billion in 2016/17.
"Overall, this is expected to lead to good increases in profit," CEO Karl-Johan Persson said.
The group said its online channel accounted for 12.5 percent of total sales in 2016/17, but 22 percent of operating profit.
H&M, which has said it will close some stores in mature markets in regions such as Europe, said it expected newly opened stores to increase sales for the group by between 1 and 3 percent in the 2019 to 2022 period.
It also held out the prospect of additional growth from two "completely new business models" it is working on, without elaborating.
Earlier this week the retailer dropped plans to ask shareholders to reinvest their dividend payout in new H&M shares, saying this would have been too difficult to carry out.
The original proposal, supported by the Persson family, took markets by surprise and played a part in sending the battered stock down to its lowest level since 2008 when announced late last month.


German economy defies trade gloom with strong growth

Updated 8 min 2 sec ago
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German economy defies trade gloom with strong growth

  • Germany’s economy, Europe’s biggest, grew by 0.5 percent compared with the previous three-month period
  • Economists had forecast a 0.4 percent increase this time

BERLIN: The German economy accelerated in the second quarter despite the US move to impose new tariffs on Europe, official data showed Tuesday, performing slightly better than economists had expected.
Germany’s economy, Europe’s biggest, grew by 0.5 percent compared with the previous three-month period. That is up from 0.4 percent in the first quarter — a figure that was revised upward Tuesday from the initial reading of 0.3 percent given in May. Economists had forecast a 0.4 percent increase this time.
Its performance in the April-June period was helped by higher private and government spending and by increased investment in equipment and construction, the Federal Statistical Office said. Rising exports were outpaced by increasing imports.
The figure underlined the German economy’s continuing robust performance, with business confidence high and unemployment low despite some disappointing data on factory orders this year and concern about global trade tensions.
It has now grown for 34 of the past 37 quarters, said Carsten Brzeski, an economist at ING in Frankfurt, but he cautioned that “the challenges facing the German economy will increase rather than decrease.”
Those include the specter of a possible escalation of trade tensions, despite a recent deal to defuse a US-European Union dispute, geopolitical risks such as that posed by events in Turkey and a shortfall in investment and structural reforms at home, he said.
In year-on-year terms, the economy expanded by 2.3 percent in the second quarter.