Business Standard

H&M sticks to dividend despite surprise fourth-quarter profit fall


STOCKHOLM (Reuters) - Fashion retailer H&M reported an unexpected fall in quarterly pretax profit on Thursday, hit by lingering costs to upgrade its logistics, but kept its dividend unchanged while assuring investors its group-wide overhaul was gaining traction.
The world's second-biggest apparel retailer after Zara owner Inditex saw full-year profit fall for a third straight year as tougher competition and the online shift kept dimming the appeal of its core budget H&M chain's physical stores.
Pretax profit in September through November shrank for the sixth straight quarter to 4.4 billion crowns ($482 mln) from a year-ago 4.9 billion, against a mean forecast in a Reuters poll of analysts for an increase to 5.1 billion.
The Swedish company has invested heavily in logistics and digitalisation and is reviewing its mix of stores and brands and is also working on a new H&M store concept.
"It has been a challenging year for H&M group and the industry but after a difficult first half, there are signs the company's transformation efforts are beginning to take effect," H&M said in a statement.
H&M proposed an unchanged dividend of 9.75 crowns per share for 2018. Several analysts had forecast the retailer would lower its annual payout for the first time since its 1974 listing with the poll showing a mean forecast of 8.95 crowns per share.
H&M said improved collections generated better full-price sales and lower markdowns towards the end of the year.
"Bolstered by these positive signals, the company accelerated its transformation plans in the fourth quarter with a particular focus on the replacement of logistics systems," it said.
Markdowns decreased by 0.6 percentage points year-on-year while inventories grew 12 percent to 37.7 billion crowns or 18 percent of sales in H&M's fiscal fourth quarter. H&M had said in September it didn't expect markdowns to grow in the quarter.
H&M said it expected first-quarter markdowns to be around 1 percentage point lower than a year earlier.
($1 = 9.0221 Swedish crowns)
(Reporting by Anna Ringstrom; editing by Niklas Pollard)

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First Published: Jan 31 2019 | 1:08 PM IST

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