H&M: 2016 Company Report

Note: The purpose of this report is to present, in short, the brand’s activities during the year of 2016. The Company Report below is done in the frame of Professional Communication class. The data is taken from the H&M 2016 Annual Report.


Executive Summary

H&M is one of the largest Swedish retail chains in Europe for clothing trade. Driven by the desire to create the best offering for their customers, withal, they are doing so in a sustainable way. H&M provides a wide and varied range of products, thus, offering customers a diversity of styles and brands. While selling relatively low-price clothes, they also ensure the quality of their products. In 2017, H&M plans to open approximately 430 new stores, to enlarge their family.

Background/History

It was seventy years ago, 1947, when Erling Persson opened a Hennes store in Vasteras, Sweden, by selling women’s clothes. Twenty years later, Erling acquired Mauritz Widforss, a fishing equipment retailer, and the Hennes & Mauritz (H&M) was opened. They began to sell clothes for men, children, and women. By 1969, Hennes & Mauritz already had 42 stores.

After changing the name of the company to H&M, it started to further expand in Europe. In 1982, Erlin Persson’s son, Stefan Persson, became the second CEO of the company. In the future, the business will be given to Erling’s grandson, Karl-Johan Persson, making H&M a family business. In 1998, H&M launches online shopping, the first online market in Sweden.

Through the purchase of FaBric Scandinavien AB, H&M welcomed Cheap Monday, Weekday and Monki brands. In 2013, another brand &Other Stories joined H&M. Meanwhile, considering the sustainability of a great importance, H&M began to use recycled and sustainably produced materials. The company climbed to 20th place in the annual index of the world’s most sustainable corporations, Corporate Knight.

Organization Structure/ Management

While possessing seven brands: H&M, COS, &Other Stories, Monki, Weekday, Cheap Monday and H&M Home, H&M has a multi-brand matrix organization. Having CEO and CFO, the company divides into Joint Group Functions and brands. Each brand has its own organization and managing director. The members of the executive management team consist of CEO and ten others, who are responsible for Joint Group Functions: finance, production, sustainability, expansion, communications, human resources, business development, and logistics. In addition, there is a person responsible for the H&M brand and a person responsible for new business, which includes the seven brands, listed above.

After welcoming 13.000 employees in 2016, H&M Company now has more than 161.000 team members. Moreover, through H&M, the company creates 1.6 million jobs for people employed by their suppliers in the textile industry.

Products/Services

H&M is one of the largest Swedish retail chains in Europe for clothing trade. The concept of H&M business is to provide consumers with affordable and qualitative fashion in a sustainable way. H&M Company produces clothes for women, men, kids, underwear, sports, and shoes, along with accessories, footwear, home textiles and beauty products. It also offers products from brands such as COS, Monki, Weekday, & Other Stories and Cheap Monday, as well as homeware from H&M Home. Each brand has its unique style.

Since H&M transforms latest fashion trends into affordable products, it also has a long list of collaborations with well-known designers, who promoted and raised the quality (design) of H&M collections. As listed below, not only designers are the main target audience for collaborations, H&M also works with celebrities.

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As for additional services, H&M works on improving the delivery services. They have already implemented next day delivery, offering it in five markets, along with time-slot deliveries in Japan. This year, H&M plans to enter Kazakhstan, Iceland, Vietnam, Georgia, and Colombia opening stores; Taiwan, Macau, Singapore, Malaysia, Hong Kong, and Turkey with online markets.Kenzo & H&M is the latest collaboration project of the company. Two labels created a colorful and patterned collection illustrating a sense of exclusivity that Kenzo brought with it.

Financial Performance

Sales. As shown in the table below, the sales of the company increased from 2014 by $ 46.245 million. Setting a goal for 10-15 percent growth in sales, H&M’s sales increased only by 7 percent in local currencies to SEK 223 billion. Due to strong US dollar, that made purchases expensive and opening 427 stores in 2016, the growth was not abrupt.

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The dark graphs show the growth of the sales in three years, while light graphs indicate the increase of the stores by 840, which were opened around the world.

As shown in the table, in UK and France the demand on H&M slightly decreased, while the USA had the most increase in the market sales.

Top Five Sales Markets

Country

2016 2015

Growth

Germany 37.174 36.943 2.31
USA 26.874 25.135 17.39
UK 15.058 16.001 -9.43
France 13.559 13.579 -0.2
China 10.842 10.559 2.83


Profit.
Digitalization, H&M’s online business, positively influenced sales and profitability. However, as the graph below shows, the company saw a decrease in profit by 22.62 percent in 2016. After a drop in demand, the company faced a sharp fall in profits. Another cause of the profit decline is in heavily investing in e-commerce to catch up within the market competition. The cold spring weather, in turn, decreased the demand for lighter clothing. As a result, it negatively affected company’s profit.

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