H&M has reported a 22% drop in profits before taxation for the first half of the year, with its CEO saying he expects a “tough first half-year”.
Profits fell to 6bn Swedish krona (£510m) and net sales were almost flat at 51.98bn krona (£441m). Overall, its sales for 2018 Q1 fell slightly to 98.2bn krona (£867m), compared with 98.4bn the previous year.
The fashion chain also experienced stockpiling issues as it said its closing inventory was “too high”. It attributed the high levels of clothing stock to weak sales.
In 2018 the company, which also owns fashion brands Monki, & Other Stories and Cos, said it plans to open around 390 stores and to close 150, resulting in a net addition of 240 new stores for the year.
Karl-Johan Persson, CEO, said: “The rapid transformation of the fashion retail sector continues, and we are in a transitional period that is both exciting and challenging. As we signalled previously, it was going to be a tough first half-year.
“We went into the second quarter carrying too much stock and we still had some imbalances in the H&M assortment – something that we are gradually correcting. Overall, however, total sales for the quarter were not satisfactory, which meant that inventory levels were still too high at the end of the period,” he added.