Pretax profit in the three months through November, H&M’s fiscal fourth quarter, fell to 4.9bn Swedish crowns (£441.8m).
Sales in the fourth quarter also declined by 4%, while H&M’s gross profit margin for the financial year to 30 November fell to 54% from 55.2% a year earlier.
As a result of the performance, H&M said it planned a net addition of about 220 stores in 2018, compared with 388 in 2017. There will be 390 new store openings and about 170 closed, while entering Uruguay and Ukraine for the first time.
A quarter of the new shops will be formats other than the flagship H&M stores, such as COS, Monki and the soon-to-be-launched Afound, which will offer discounted products both from external brands as well as the wider H&M group.
Karl-Johan Persson, H&M, CEO said: “The fashion industry is changing fast. At the heart of the transformation is digitalization and it is driving the need to transform and re-think faster and faster. This is presenting many challenges but we believe we are well-placed to adjust to the new dynamics and take advantage of the opportunities in front of us.
“Part of this opportunity is to do with the size of the market. While the H&M group is a big player, our market share is still relatively small. It is also a growing market. So, while the H&M group has come a long way, we are most excited by the distance we still have to go and our fitness for the opportunities ahead.
“Our performance during 2017 was mixed, with progress in some areas but also difficulties in others. Our online sales and our newer brands performed well but the weakness was in H&M’s physical stores where the changes in customer behaviour are being felt most strongly and footfall has reduced with more sales online.
“But our performance does need to be seen in the wider context of the transformation that the industry is going through. Underneath the disappointing recent performance, we see reasons for optimism and good learnings but we need to accelerate the transformation even more.”