Fast fashion as a category has disrupted how the apparel industry operates, and even one of its largest players is having a hard time adapting to the rapidly changing retail environment. H&M is opening far fewer stores in 2018 than in previous years and its online traffic growth is slowing. “The industry changes are challenging everyone and this will continue in 2018,” admitted H&M CEO Karl-Johan Persson in a statement.
H&M plans to add approximately 220 net new stores in 2018, well off the pace of 388 in 2017. The fast fashion retailer plans to open approximately 390 new stores and close about 170 this year, and will enter Uruguay and Ukraine for the first time. The 170 closures will mark the most H&M stores shuttered in a single year since 1998.
The company’s profits fell 33% in Q4 to 3.99 billion kronor ($506 million), with sales dropping 2% to 50.4 million kronor ($6.4 million). H&M said it expects sales between Dec. 1 and Jan. 31 to increase by just 1% in local currencies, after a fall of 2% in Q4. To make matters worse, H&M finished the year with net debt on its balance sheet rather than net cash for the first time in more than 20 years.
The retailer’s online presence has floundered compared to that of its major competitors. The H&M online “visit share,” the percentage of web site visits within an entire industry or sector, grew only 22% from March 2014 to March 2017, according to Hitwise. Despite remaining the leader in visit share, competitors such as Torrid (243%), ASOS (63%), Zara (71%) and Uniqlo (470%) gained significantly more share on a percentage basis.
The fast fashion retailer is trying new channels to get out of its rut. H&M will expand its horizons to China, selling the H&M and H&M Home brands on the Alibaba e-Commerce platform Tmall beginning in March 2018.
Additionally, the company will launch an off-price brand, Afound, which will sell products from its own brands as well as third-party fashion and lifestyle brands. The brand will host a store in Stockholm, Sweden and an online marketplace.