PARIS — Hennes & Mauritz AB shares sank to their lowest levels in eight years Friday after the company reported disappointing fourth-quarter sales.
Sales in the period ending Nov. 30 totaled 58.45 billion kronor, or $6.95 billion, including VAT, down 2 percent in local currencies. The Swedish retailer called the quarterly performance “significantly below the company’s own expectations” due to “weak” business at its stores.
Revenues were hit by reduced footfall, the Swedish retail giant said, announcing plans to close more stores and launch its H&M and H&M Home brands on Tmall in the spring. The fast fashion company already sells its brand Monki through the online platform. H&M generates around $1.3 billion in China, where it opened its first store a decade ago.
H&M said it is accelerating its online push to respond more quickly to changing consumption habits. “This includes continued integration of the physical and digital stores, and intensifying the optimization of the H&M brand’s store portfolio — leading to more store closures and fewer openings,” it said in a statement.
The quarterly sales figure was “quite possibly the worst quarterly sales performance on record,” Cedric Lecasble, analyst with Raymond James, said in a note to clients. He had banked on a 3 percent rise in quarterly sales at constant rates, which was already below the consensus estimate of a 5 percent rise.
“H&M has captured some benefits from the consumer shift to online shopping, but the group’s stores have not. Management is rightly investing heavily in an integrated off-line/online model, based on which the store becomes more central (through pick-ups, returns and repurchases),” said Lecasble. “The transition to a stronger model is proving to be slow, and the market knows it,” he added.
H&M has been in focus in recent weeks, with Barclays downgrading the group to underweight in November, noting much of its growth came from opening new stores. Lecasble Friday also highlighted the issue, saying the company should focus more on improving the existing store set up and performance than opening new ones. RCC Capital Markets in a note earlier this month flagged store and online integration at H&M as “challenging.”
H&M said on Friday that it is in advanced discussions to launch the rest of its brands — which include Cheap Monday, COS, & Other Stories, Weekday and Arket — on Tmall.
“H&M is a perfect fit for Alibaba’s Tmall platform,” said Alibaba president Michael Evans, calling the retailer “one of the world’s most innovative fashion companies.”
“Tmall is an important complement to our existing physical and digital stores,” H&M chief executive officer Karl-Johan Persson.
“This should dramatically extend the reach of the H&M brand in China,” Richard Chamberlain, analyst with RBC Europe, said in a note to clients. Chamberlain said the quarter was “very challenging,” adding the company’s product offer was “very sub-optimal this season.”
H&M is looking to create excitement around its brands with celebrity collaborators, drafting in Nicki Minaj to star in its holiday campaign. The retailer said on Friday it is working with hip-hop star G-Eazy for a men’s collection set to drop on March 1 in stores and online around the world.
“We love his unique take on streetwear with tailoring,” said H&M’s men’s wear design director Andreas Löwenstam, citing the rapper’s appetite for checks and vivid colors.
The company’s quarterly sales report comes two days after Zara-owner Inditex reported a 6 percent rise in nine-month sales, reassuring markets about its performance ahead of the crucial holiday period. Inditex has grown in favor with analysts over H&M in recent months, with reports praising the Spanish company’s push online.