STOCKHOLM, Sweden — Hennes & Mauritz AB reported its biggest drop in profit in six years, adding pressure on Chief Executive Officer Karl-Johan Persson, who is trying to right the ailing Swedish clothing chain after recent slip-ups.
Operating profit fell 14 percent to 20.6 billion kronor ($2.6 billion) in the 12 months through November, H&M said in a statement Wednesday. Analysts expected 20.4 billion kronor. The company also said it plans to close 170 stores this year and add a new format called Afound selling off-price merchandise.
“The industry changes are challenging everyone and this will continue in 2018,” Persson said in the statement.
As online shopping has soared, fewer people are visiting H&M’s vast network of physical stores.
The world’s No. 2 fashion chain by sales has recently hit a number of roadblocks, reporting the biggest drop in quarterly sales on record for the final three months of the past fiscal year. As online shopping has soared, fewer people are visiting H&M’s vast network of physical stores. The company has struggled to cut inventory and has been forced to sell items at steep discounts, and some investors have sold shares amid fears the company is being too slow in responding to the industry’s digital shift. Didner & Gerge Fonder AB, one of H&M’s top shareholders, called for a management shakeup.
The Stockholm-based company’s image was also tarnished by accusations of racism after an advertisement featuring a black child wearing a hoodie with the text “coolest monkey in the jungle” sparked a social-media storm and protests in South Africa earlier this month. H&M has apologised for the ad.
The company has said it’s planning to recover from the slump by expanding more online, diversifying with new brands, improving its shops and using technology to minimise inventory and speed up delivery times.
By Anna Molin; editors: Christopher Kingdon, Thomas Mulier and John J. Edwards III.