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H&M Foot Traffic Is Down, and So Are Its Profits

The Swedish mega-retailer reported a 20 percent dip in net profits in its third quarter.
Photo: Vincent Isore/IP3/Getty Images

Photo: Vincent Isore/IP3/Getty Images

It was just three months ago — almost to the day — that H&M reported a surge in sales; back in June, the Swedish retail giant surprised itself with a 10 percent profit boost in its second quarter, as compared to the same period last year. But as we both know and write about tirelessly on this website, retail is a fickle, fickle business, and it only continues to get more volatile as 2017 marches on. If this has taught us anything, it's that no brand is safe — and apparently, that now includes H&M.

On Thursday, the fast-fashion retailer reported its third-quarter earnings for the three months ending August 31, and they didn't look great: H&M's last period saw a 20 percent dip in net profit, ringing in at 3.84 billion Swedish kronor (or roughly $471 million). In an earnings report, H&M attributed that decrease to a number of factors, including a "reduced footfall to stores in several of [its] established markets," for which H&M "did not fully compensate" online. Of course, that H&M experienced a reduction in foot traffic is no surprise; we've been seeing it across the board and around the world, as more and more retailers shutter brick-and-mortar locations.

It also may have gotten a bit too excited about its sales strategy. It cleared out its end-of-season inventory, yes, but that didn't turn a profit. "Through our aggressive summer sale we succeeded in improving the inventory position," commented CEO Karl-Johan Persson. "This contributed to the autumn collections getting off to a good start, although sales slowed somewhat towards the end of September."

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Looking ahead, H&M's online store is set to open in two new markets in 2017 — the Philippines and Cyprus — and that's in addition to the six online markets in which it's already opened this year; that expansion will continue in 2018. It's still pushing its brick-and-mortar offerings, too, with new stores planned for Kazakhstan, Colombia, Iceland, Vietnam and Georgia (the country), and in 2018, Uruguay and Ukraine. 

It looks like H&M is familiar with its shortcomings, and as a result, expects to grow its online sales by "at least 25 percent per year going forward." 

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