Facing the shifting preferences of consumers, H&M has announced that 2018 will feature fewer brick-and-mortar store openings as it moves to adapt to increasingly digital shopping patterns. The move comes after years of rapid growth from the fast-fashion giant, which now finds itself struggling somewhat to integrate into the eCommerce landscape.
Shares were down more than 33 percent over the last year, and H&M faced considerable criticism in the last few weeks following a reportedly racist ad.
According to news from CNBC, H&M will only open about 220 stores in 2018, as opposed to the 388 it built in 2017. However, 220 is a net number; H&M will actually be opening 390 stores and shuttering 170.
“The scale of the reduction will surprise some today. And it will leave the bears questioning why H&M still enjoys a ‘growth stock’ rating,” wrote Morgan Stanley Analysts Geoff Ruddell and Amy Curry, who categorized H&M as an “underweight.”
Other concerns for investors on Wall Street include the fact that the retailer ended 2017 with a net debt on its balance sheet — instead of net cash — for the first time in two decades. Cash flow was reportedly hurt by an uptick in stagnant inventory.
“The industry changes are challenging everyone, and this will continue in 2018,” Chief Executive Karl-Johan Persson told CNBC. He admitted that the company isn’t anticipating achieving its target of a local-currency sales growth of 1015 percent in 2018.
To make its supply chain more efficient, Persson stated that H&M will be investing in analytics and technology.
The chain also announced its intentions to begin selling the H&M and H&M home brands on Chinese eCommerce platform Tmall, promising to launch in more retail markets by the end of the fiscal year.