polo long sleeve H can’t become a digital powerhouse overnight
Shares in the Swedish fashion company have declined by 45% over the past year as investors worried that it was being left in the dust by more nimble online rivals.
“2018 is expected to remain challenging,” the company said in a statement that was released as part of its first “capital markets day,” an event designed to showcase its turnaround plans.
James Bidwell, co founder of the retail consultancy Re_Set, said that H is held back by a “massive legacy of stores and all the infrastructure that goes with that.” He said competitors such as ASOS and boohoo are much more agile.
H which has an online presence in 43 markets, but physical stores in 69, made the case that its digital transformation is underway.
The world second biggest fashion retailer revealed for the first time on Wednesday that its online business accounts for 22% of its operating profit.
It said it expects online revenue to increase at least 25% this year, and digital sales to increase 2.5 times from current levels by 2022.
Its smaller, newer brands are performing well, including COS, Other Stories, Weekday, Cheap Monday, Monki and Arket. The brands make up just 7% of total sales, but they growing quickly.
The company said that about 45% of its investments went into digital initiatives over the past financial year. It said last month that it would launch a store on Tmall, an Alibaba platform capable of reaching hundreds of millions of shoppers in China.
“H are on top of the accelerated digital investments, they are creating new brands, so this could put them ahead of competitors,” said Bidwell. “Consumers are responding to the emergence of new brands.”
Investors were not convinced: Shares opened higher on Wednesday, but ended the trading session down by 5%.
Some aspects of the company strategy remain unclear.
H mentioned Wednesday that it is developing “two separate and completely new business models” that would provide “great opportunities for further additional sales.”