PARIS — Hennes & Mauritz AB sounded an optimistic note about restructuring efforts and business at the start of the year, noting progress, including less discounting, even as fourth-quarter profit declined by 32 percent.
The fast-fashion retailer continues to invest in its overhaul, adding new logistics centers and implementing a new online platform in all markets, including its largest, Germany, in January.
But much of the group’s overhaul hinges on a deeper embrace of technology, which includes a high-profile recruit — Christopher Wylie. Known for his work at Cambridge Analytica, mining consumer data from Facebook for targeted political messages during the 2016 presidential elections, Wylie was thrust in the spotlight after he released details of the project to the public.
H&M said Wylie will advise the company on customer data and artificial intelligence, with an eye to using the tools to design more efficiently, to reduce waste and improve the relevance of its offer. With an estimated 5 billion visitors in stores and online, H&M has the potential to amass huge amounts of data that it can use to focus its offer, tailoring window shop displays, for example, to different markets or even to local tastes. Profit for the quarter ending Nov. 30 was 3.54 billion Swedish kronor, or $390 million, while operating profit stood at 4.3 billion kronor, a 10 percent decline.
Sales for the Dec. 1 to Jan. 28 period rose 4 percent in local currencies, and the group projected markdowns for the first quarter to be a percentage point lower than the same period last year.
Analysts noted the results were mixed overall, with encouraging signs for the first quarter even if investments were higher than expected.
“Guidance on markdowns was stronger than anticipated, however, H&M’s investments in its offer are more than the market anticipated and may disappoint those looking for signs of margin normalization,” said Richard Chamberlain, analyst with RBC Europe, noting margins fell below consensus. Chamberlain also said the first two months of the first quarter seemed off to a good start.
Shares in the company closed up 2.2 percent to 140.60 Swedish kronor.
The company said that while it missed some of the targets set at the beginning of 2018, it outperformed several key markets in the fourth quarter, including the U.K, where sales grew 8 percent, with a 38 percent rise in online growth helped offset a 1 percent decline in store sales. The company also flagged brisk growth in China, India and Russia, which was driven by both sales in stores and online.
“It has been a challenging year for H&M group and the industry, but after a difficult first half, there are signs the company’s transformation efforts are beginning to take effect,” said chief executive officer Karl-Johan Persson.
Addressing one of the chief concerns of investors, the executive signaled H&M has improved its amount of full-priced sales, resorting to fewer markdowns toward the end of the quarter. This allowed the company to accelerate transformation efforts, especially upgrading logistics systems, a strategy that led to higher costs but will improve services for customers, the Swedish fast-fashion retailer said.
“We are now seeing clear signals customers appreciate the improvements that we have made — we see this in more full-priced sales, higher conversion rates, more recurring customers and increased customer satisfaction, this clearly shows that we are moving in the right direction when it comes to the assortment,” Persson told analysts on a conference call.
Part of the improvement came from the company’s investment in better prices and higher quality, he noted.
H&M is also working in improving the shopping experience in its stores, and is conducting tests around the world, gradual rollout.
The company recently reopened its Hammersmith store in the U.K., which has clothing repair services as well as a florist shop and larger fitting rooms.