Turnaround plans for H&M seem to be paying off: the company reported a net sales increase of 10% during Q1 2019. The retailer attributed this growth to its ongoing brick-and-mortar transformation and growing investment in e-Commerce, which will include launching on two Indian e-Commerce sites later this year.
One of H&M’s strategies was reducing its reliance on promotions, which resulted in the retailer’s gross margin to reach 50%, up from 49.9%. Markdowns in relation to sales fell by approximately 1.5 percentage points in Q1 2019 compared to Q1 2018, and the retailer expects them to decrease further in Q2.
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The company’s results were above what analysts expected, according to Reuters. H&M’s gross margin was expected to fall to 49.4% instead of growing, and its pretax profit fell to $112 million from $135.9 million a year ago. While this was still a significant decline, analysts had predicted pretax profits of just $76.4 million.
Sales from March 1 through 27 have been promising, rising 7% in local currencies, which exceeds the 4% local currency growth experienced during Q1 2019. Some of the initiatives credited for this improvement include:
- The integration of advanced data analytics and AI into the supply chain;
- Continued development of new concepts and optimization of the brand’s brick-and-mortar portfolio;
- Improvements such as faster and more flexible delivery options, and payments for e-Commerce offerings; and
- Continued integration of physical and online stores.
India is a particularly important market for H&M’s expansion; the retailer saw combined retail and e-Commerce sales grow 42% in the nation during Q1 2019. H&M is aiming to retain that momentum by putting its products on the Myntra and Jabong e-Commerce platforms, building on the retailer’s existing web site and 41 stores in the nation. H&M sales hit $151.1 million in India during fiscal 2018.
