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.
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.
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