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Are H&M’s logistics upgrades paying off? The two numbers that matter

H&M

H&M claimed an ongoing upgrade of its logistics network pushed up costs in its Q4 results, but it may already be reaping the benefits.

Two numbers stand out from the results, the first being that profits after tax were down 28% year-on-year to SEK 12652 million (€1.2 billion). This is because logistics investments were responsible, along with negative year-end effects, for costs of €54 million.

H&M built three new fulfilment centres, adding around 230,000 square metres to its footprint, during the quarter.

But another number shows why these investments are important – the company’s net sales were up 5% to €5.45 billion, with online sales rising 22% year-on-year to reach €2.9 billion.

The report said that the improvements would  allow H&M to offer customers faster deliveries and a wider assortment, as well as reduce the capacity constraints that it had experienced in 2018, despite a short-term impact on margins.

CEO Karl-Johan Persson said the logistics improvements, along with other investments, was resulting in increased costs but leading to a range of improvements for customers.

The company said it had experienced unspecified “difficulties” with the logistics upgrade but said the “lessons learned” would be applied to additional investments in the future.

These logistics upgrades come alongside the migration of its online portals to a new IT platform.

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