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H&M Just Saw Its Biggest Profit Dip in 6 Years

Looks like 2017 just wasn't its year.
Photo: Noam Galai/Getty Images

Photo: Noam Galai/Getty Images

Last we checked in on H&M, it had reported a serious drop in foot traffic, as well as a corresponding slide (20 percent) in its third-quarter profits. Oh, yeah, and there was that whole racist photo disaster, which caused the Swedish mega-retailer to lose collaborators The Weeknd and G-Eazy. (It's since issued a number of apologetic statements, as well as hired a diversity leader.) Before that, though, H&M had actually been doing okay: It launched its new fashion and lifestyle brand, Arket, in August, signed Natalia Vodianova to front its Conscious Exclusive collection and in its second quarter, even surprised itself with a 10 percent profit boost

Why, then, did H&M just report its biggest profit dip in six years, according to Business of Fashion? On Wednesday, H&M announced in a statement that in the 12 months ending in November, operating profits declined 14 perfect to 20.6 billion kronor (roughly $2.6 billion). In a release, it attributed the sales slide, once again, to its physical stores, but noted that its online traffic compensated for such weaknesses. 

So, it should come as no surprise that H&M has plans to lean into e-commerce business quite heavily in 2018: It may be opening approximately 390 new stores in places like Uruguay and Ukraine, but it's also closing 170 ones. And, in addition to expanding its digital stores into four new markets (including India, and via franchise to Saudi Arabia and the United Arab Emirates), it already has plans to launch another new brand (in Sweden, at least): Afound, an off-price marketplace "offering products from well-known and popular fashion and lifestyle brands," both inside and outside of the H&M umbrella.

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All in all, H&M doesn't seem too concerned about last year's performance, perhaps because it has so much in the works. "The fashion industry is changing fast. At the heart of the transformation is digitalization and it is driving the need to transform and re-think faster and faster," said Karl-Johan Persson, CEO, in a statement. "This is presenting many challenges, but we believe we are well-placed to adjust to the new dynamics and take advantage of the opportunities in front of us."

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