Published
Sep 5, 2017
Reading time
3 minutes
Download
Download the article
Print
Text size

H&M UK sales "stagnate" despite new stores

Published
Sep 5, 2017

H&M has just filed its UK results for the year to November 30 2016 and the figures confirm just how tough clothing retailers had it in 2016. Total revenue rose only slightly to £1.048 billion from £1.0132 billion in Britain, despite the firm operating from more stores.


H&M turned in a lacklustre UK performance last year



The UK being the group’s third biggest market and the company trading from 282 stores, nearly 20 more than a year earlier, means that almost-flat sales aren't good enough.

Other countries obviously did better. The UK accounted for 6.8% of the group’s total net sales in the fiscal year, but that number was down from 7.6% in the prior year as other markets grew. And the weak performance in the last year meant the company’s clothing market share stuck at 2.4% (source: GlobalData).

Pre-tax profit dipped slightly to £50.38 million in the year to November 2016, from £50.43 million a year earlier, while net profit dropped to £35.8 million from the £36.3 million that had been seen in the fiscal year to November 2015.

So what do analysts make of the figures? Kate Ormrod, Lead Retail Analyst at GlobalData, said that despite its broad appeal, focus on trend-led ranges and affordable price points, “H&M was unable to convert its relevance into revenue in 2016, leaving its UK clothing market share stagnating as it lost out to the likes of Primark and TK Maxx.”

The fact that it had 18 more stores during the year, including a supersized three-storey flagship in Westfield Stratford, indicated weak comparable sales “which needs to be swiftly rectified given its extensive UK store portfolio,” she added.

She believes that investment in quality to showcase value for money, and a more competitive loyalty scheme are needed to drive spending at H&M’s core fascia and with weak footfall continuing to hit fashion store sales in 2017 and 2018, greater emphasis must be placed on its online offer.

“Like many of its value rivals, H&M has been an online laggard, effectively gifting sales to the likes of Asos and Boohoo as its proposition remained uncompetitive,” she explained.

But she believes the company has made good progress in FY2016/17, with a trial of click & collect at its core H&M chain. “An expeditious rollout is essential, with the potential for a delivery subscription scheme as well. Online fulfilment at its smaller brands remains an afterthought, with investment required to tempt shoppers online given their reduced physical reach,” she said.

BRANDS

Moving away from the period these results cover, Ormrod is impressed by the fact that, in contrast to online, “H&M is willing to take greater risks with its brand portfolio, launching two new fascias in the UK in August 2017, Weekday and Arket.”

However, she is unsure that Arket is differentiated enough to make a big impact. She said: “While H&M does not suffer from the same level of brand overlap as its closest rival Inditex, Arket does deviate from the norm, as it focuses on more classic garments rather than the trend-led ranges we have come to expect.”

She cited its quality and superior in-store experience (“both necessary given its Cos-like price points”), but said that Arket “feels a little lacklustre…. failing to excite fashion conscious UK shoppers will limit its potential, with & Other Stories and Cos better placed for UK expansion.”

That’s an interesting viewpoint, but is it correct? It’s also perhaps significant that the company has opened its first Arket branch directly adjacent to its Cos London flagship. Anecdotal evidence Fashion Network picked up on opening day suggested that many potential customers see Arket as complementary to Cos.

More than one person told us that they like the idea of buying trend-led items in Cos and popping next door to buy minimalist classics, plus beauty and homewares, from Arket, while also stopping off for a snack in its café.

Copyright © 2024 FashionNetwork.com All rights reserved.