The UK retail industry announces another hit this week as high street clothing brand H&M announce their pre-tax profits for the financial year have dropped by over 70%. The clothing retail company which originated in Sweden in 1947, has become one of the UK’s most recognised fast-fashion high street brands and have over 260 stores based in the UK and Ireland, with 23 new stores being opened this past year.
On Friday 6th September, H&M filed their end of year account at Companies House and announced their operating profit have plummeted by 68.4% to £12.21 million, making their pre-tax profit £10.72 million. The brand has seen a significant drop over the course of a year as their 2018 end of year report announced £37.3 million in pre-tax profits.
What caused the H&M profit crash?
The fashion giant claimed much of the profit crash was due to a reduced operating income from their parent company the H&M Group. Other industry experts speculate the decline in profits could be related to the new UK initiative of avoiding fast-fashion and aiming to shop from more sustainable sources. Whether or not this initiative will have any long-term effects on H&M is still speculative.
Is it all bad news?
H&M acknowledges the end to their financial year is somewhat disappointing but insist this is the best result H&M could have hoped for considering this year’s tough trading conditions. Indeed, as a retail company, H&M remains in a fairly strong position as they have been able to consistently turn a profit over the last few years, unlike other retail clothing brands, such as American Apparel. American Apparel has filed for bankruptcy twice after reporting consistent losses in recent years.
The future of H&M
To address the decline in profits, H&M has announced plans to open three new stores over the course of the next financial year. The brand also hopes their new ‘pay later’ scheme will attract new buyers and increase the profits of the company. Toni Galli, Country Manager for H&M in the U.K. said, “We are happy to now offer fashion fans in the UK a whole new way of paying their fashion finds…we have developed an H&M-unique payment solution that offers our fans a truly modern shopping experience.” Whether or not this new payment method will have an influence on H&M’s future financial situation is yet unknown.