High street fashion giant H&M has admitted it made “mistakes” after store sales were hit amid the switch to online shopping.
H&M saw pre-tax profits slump by more than a third to 4.9 billion Swedish krona (£442 million) in its fourth quarter to the end of November, down from 7.4 billion Swedish krona (£667 million) a year earlier.
The Swedish firm – the world’s second-biggest clothes group after Zara owner Inditex – said a “disappointing recent performance” saw group-wide fourth quarter sales including VAT fall 4% – with the UK seeing a 5% fall in local currencies.
It added that sales in the crucial period from December 1 to January 31 are expected to rise by a meagre 1% in local currencies.
H&M warned it will have more markdowns in the new year sales after the weak festive trading.
Full-year figures from the chain also showed pre-tax profits fell 13% to 20.8 billion Swedish krona (£1.9 billion) after sales rose by a weaker-than-expected 4%.
Karl-Johan Persson, chief executive of H&M, said: “2017 was a year where we made more steps forward and did more groundwork for the future, but we have also made some mistakes that have slowed us down.”
He added: “The fashion industry is changing fast. At the heart of the transformation is digitisation and it is driving the need to transform and re-think faster and faster.”
The group blamed its poor recent sales on “weakness in physical stores where the changes in customer behaviour are being felt most strongly and footfall has reduced with more sales online”.
Over its full-year, H&M said annual sales in the UK – where it has 292 stores – rose 3% in local currencies, but fell 3% when translated into Swedish krona.
The group said it would open around 390 new stores in 2018, but added it would shut about 170 shops in other areas as part of a constant review of its global estate.
“The industry changes are challenging everyone and this will continue in 2018,” Mr Persson said.