H&M Shares Plunge as Pivot to Digital Falls Short -- Update

Shares in Hennes & Mauritz AB's dropped more than 15% on Friday after the Swedish fashion retailer reported weaker-than-expected fourth-quarter sales as it continues to grapple with the shift toward online shopping.

H&M has lagged behind competitors in embracing e-commerce, and although its digitization process is now in full swing, accelerating online sales aren't fully compensating for fewer shoppers visiting its stores in several established markets.

"The quarter was weak for the H&M brand's physical stores, which were negatively affected by a continued challenging market situation with reduced footfall to stores due to the ongoing shift in the industry," H&M said.

Sales in the quarter ended Nov. 30, excluding value-added tax, fell 4% from a year earlier to 50.39 billion Swedish kronor ($6 billion). That missed analysts' expectations of 54.07 billion kronor, according to data provider FactSet. The company didn't give profit figures for the quarter and will report full-year earnings in January.

The downbeat figures prompted shares to plunge to an eight-and-a-half year low, falling 15% to 20.14 kronor.

To better position itself in the new retail environment, the company said it is accelerating its ongoing transformation program, continuing the integration of physical and digital stores and intensifying the optimization of stores. It said such measures will lead to more store closures and fewer openings.

In a separate announcement Friday, H&M said it has extended its collaboration with Alibaba Group Holding Ltd.'s Tmall e-commerce platform. H&M's Monki brand is already sold on the platform in China, but the new deal will see both the H&M and H&M Home brands launch next spring.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

December 15, 2017 05:27 ET (10:27 GMT)