Earnings

H&M Strives To Unload Excess Inventory

H&M

Here come the clothing sales: H&M, burned by approximately $4 billion in excess inventory, will offer more clothing discounts for consumers in the third quarter of 2018, company executives have said. The news came as the fast-fashion chain posted a net profit of about $520 million for the second quarter, up 29 percent year over year but below analyst expectations of about $525 million. Revenue increased about 2 percent to approximately $6.74 billion.

“The inventory level is still too high and will lead to increased markdowns in relation to sales in the third quarter, compared with the same period last year,” said Nils Vinge, the retailer’s head of investor relations, during a recent conference call with investors. “Gradual improvements to the balance and precision of the H&M assortment, combined with shorter lead times (which will allow us for more buying in season), will result in more full-price sales  and, with that, improved inventory levels in the future.”

Earlier this year, H&M said it planned to close 170 stores during the year, but the chain has revised that, according to comment made on the call.

“In 2018, we plan to open 240 new stores net,” said CEO Karl-Johan Persson. “The number of planned closures has been somewhat lowered because we have obtained substantially improved lease terms for some of the stores that we have planned to close.”

The chain also is working to improve its online offerings and make itself more attractive to digitally-savvy shoppers.

“We are focusing mainly on enhancing the product presentation to make the experience and ... also by personalizing our apps and our sites,” Persson said during the call. “And we are improving various functionalities, such as payment options and deliveries. And when it comes to the integration of the physical and digital channels, this work includes improvements and rollout of features such as Click & Collect, online returns, in-store and online shopping in-store.”

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