H&M profits miss expectations, shares tumble

Swedish retailer H&M’s stock fell 4% on Thursday morning after its fourth quarter results that missed forecasts.

H&M’s net profit fell 11% in the final quarter of 2018 to Swedish krone 3.45bn from SEK 3.99bn a year earlier, missing analyst forecasts of SEK3.8bn.

Sales rose to SEK 56.41bn from SEK 50.41bn a year ago. The company said that its improved collections generated better full-price sales and lower markdowns towards the end of the year. It predicts a fall of 1% in markdowns for the first quarter of 2019.

"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," chief executive Karl-Johan Persson said.

"This gave us confidence to accelerate our transformation plans in the fourth quarter with a particular focus on the upgrade of our logistics systems. Inevitably resulting in increased costs but will lead to a range of improvements for customers,” he added.

H&M is one of the retailers that has suffered the shift from physical to online shopping recently and has seen less customers visit its stores. This has prompted it to change the balance of investment to towards digital.

It has also previously said it was having issues implementing logistic systems, but now its capital expenditure will fall compared to 2018. The company spent around SEK450m in upgrades in logistics last year.

Nevertheless in 2019, H&M said it plans to add 175 new stores (mostly outside Europe and in the US), with many consisting of newer brands.