Fast Fashion Brand H&M, The Third Generation Of Descendants, Finally Admit Mistakes For The Group'S Low Performance.

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Karl-Johan Persson, the third generation successor and chief executive of the same name group, finally made a mistake for the group's sluggish performance.

After disclosing the worst fourth quarter performance since December 15th, Karl-Johan Persson said he was unhappy with the company's performance in 2016 and 2017, because his family business was less than expected.

According to the world clothing and shoe net, as of the end of November, in the 2017 fiscal year, H&M Hennes & Mauritz AB (HM-B.ST) Haines Maurice Group recorded only 3% sales growth.

Although the company spokesman said that the group's annual sales had never declined since its listing in 1974, but the group's sales recorded a 2% fixed exchange rate decline in the fourth quarter, the worst performance in 20 years since 1998, and during the first quarter of 2011, the group experienced a drop in the real exchange rate.

For the group's mistakes, part Karl-Johan Persson has been resolved and others are being solved.

Electricity supplier problem:

While releasing the four quarter sales results, the Swedish group also announced that H&M and H&M Home will officially enter Tmall Tmall.com in 2018, while other brands of the group are also evaluating the possibility of cooperation with the latter.

(BABA.N) cooperation between China and Japan, even though Zara, the biggest rival brand in 2014, had to face the fact that it could not break through with single brand, and finally entered Tmall after two years of self electricity business. H&M still expressed the wish to control the online channel.

The strategy of the electricity supplier is the most critical part of the Swedish group.

Societe Generale, an analyst at Societe Generale, Anne Critchlow, has consistently criticized the Swedish group's slow online strategy in its past reports.

After the fourth quarter earnings report, the bank said that H&M, regardless of online and offline, is suffering from the devouring of competitors, including the same products with only H&M 1/3 cheap brand Primark and ASOS PLC (ASC.L), Zalando SE (ZAL.DE) and Boohoo.com PLC (ZAL.DE) are taking advantage of price and channel advantages to snatch young customers.

Data show that ASOS PLC and Zalando SE continue to maintain high double-digit growth, while Boohoo.com PLC PLC is the best performing company in the open market in the past two years. In the first half of August 31st, it benefited from acquiring company's revenue doubled.

Karl-Johan Persson said that the mistake part of the group should be attributed to the apparel retailing industry in a great change. He also acknowledged the imbalance in the category development of H&M, which directly led to a vicious cycle of high inventories and discounts.

However, Karl-Johan Persson still says that H&M is one of the strongest clothing brands in the world and has an unparalleled position in the industry.

Family control issues:

Stefan Persson, chairman of the Haines Maurice group and father of Karl-Johan Persson, has done his best to support his successor.

The documents of the Stockholm stock exchange show that on December 15th, 18 and 19, Stefan Persson, respectively, increased 7000000, 8500000 and 4500000 shares of the group by 173.2677 kronor, 168.04 kronor and 172.345 Swedish kroner respectively, which cost 3 billion 416 million 800 thousand Swedish kronor, or 410 million dollars, and their family holdings increased to 41.7%.

Last time, Stefan Persson, which cost hundreds of millions of dollars, increased its stake in Haines Maurice group in May, while the price increase was close to SEK 220 per share.

In December 15th, the share price of Haines and Maurice fell sharply on the day of earnings announcement. The value of a single day evaporated 6 billion dollars.

Stefan Persson, which has been increasing its father's business since this year, is both confident in the future of the group and may also face pressure from investors.

Because after the disclosure of the fourth quarter earnings, investors have expressed the hope that the Stefan Persson family will hand over their daily management rights to learn the Amancio Ortega, the founder of their rival Zara.

Amancio Ortega, the world's richest richest man, handed in the right in 2011 to hand over the Inditex SA (ITX.MC) to India Industria group (Industria de Dise o Textil SA).

The pfer of rights between Amancio Ortega and Pablo Isla was the most brilliant period of H&M. The Swedish group made its debut in 2012 with the popularity of luxury brand collaboration series marketing.

However, after a short period of joy, Indo textile continues to dominate the apparel industry for many years, and Pablo Isla has repeatedly made the list in various outstanding CEO awards.

Henrik Didner, chairman of Didner & Gerge Fonder AB, one of the top ten shareholders of Haines and Maurice group, told Swedish financial media Dagens Industri that it may be time for the Persson family to give up control, and the Swedish company may need a new way of management.

The public criticism of Henrik Didner is extremely unusual for Sweden's third largest groups of income, just like Karl-Johan Persson's rare recognition of making mistakes.

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Growth and business models:

In the face of declining sales, especially the weakness of flagship brand H&M, the Swedish group said that the financial year will start closing operations. Over the past few years, the group has added more than 300 net stores a year. This strategy has been considered by the analysts in the retail industry to be quite radical.

H&M's Spanish rivals have slowed down their sales in recent years, shifting more energy to online.

Indy Textile Group also released a quarterly slowdown in the middle of this month. As of the three quarter of October, the Spanish group's net sales rose by 6% to 6 billion 292 million euros, which basically met market expectations, but the increase was far below the 11.5% in the first half of the fiscal year.

Management in the earnings report even ignored the three quarter of the same store sales data, only referred to "growth remained strong", while the first half of the fiscal year growth rate of 6%, but has been significantly slower than last year's first half of fiscal year 11%.

The market believes that the same store sales of Indo textile group can only be positive now, but it is hard to be "strong", while the investment bank Raymond James expects the H&M store sales in the fourth quarter of the same year to fall by 9%.

The choice of closing stores with H&M should be slightly different from the slowdown in sales and channel pformation. The Indo textile group chose to sell "sublet" to sell the retail real estate belonging to the majority shareholder Amancio Ortega, and then ask the new owner to rent the property to the Spanish group through the sales framework agreement.

In addition to holding the largest apparel group in the world, Amancio Ortega has shifted its power to Pablo Isla, and has focused more on the real estate business.

Indo Textile Group adopts the property of Amancio Ortega Ortega in the large flagship stores of most retail streets in Europe and the United States, which are very beneficial to Indo textile group or Amancio Ortega. Retail business has stable shops, and rents can be pferred to low tax European countries.

In 2015, Amancio Ortega's real estate investment company Pontegadea Inmobiliaria SL was valued by the market as 6 billion euros.

At Monday's earnings conference, Nils Vinge, the Swedish group's investment relations director, said that the group would shorten production time and speed up the pace of new development, so that the circulation of the design from Swedish center to Asian manufacturing base and then to the global stores rose rapidly, "let shoppers of the shop get excited."

Zara today became the leader of the apparel industry and the "Whampoa military academy", another retail business after Procter & Gamble group, largely depended on the global supply chain strategy of the group.

Indo Textile Group, which makes use of European manufacturing and RFID technology to respond quickly to consumers, has become a recognized advanced mode in the retail industry at present.

Nils Vinge's remarks show that the current three major competitors of Zara, Gap cover, Gap, Japan's Uniqlo UNIQLO and H&M, are improving speed.

Multi brand strategy:

Despite its weak H&M performance, the Swedish group said other brands of its company are still growing.

The Haines Maurice group currently has seven brands including H&M, COS, Other Stories, Monki, Weekday, Cheap Monday and ARKET, and the company will launch another new brand next year.

However, except for H&M, only COS approached or entered $1 billion.

On the contrary, in addition to Zara, Indo Textile Group has sold more than four brands of Bershka, Pull & Bear, Massimo Dutti and Stradivarius. The sales of Zara Home and underwear brand Oysho last year were close to 800 million euros and more than 500 million euros, and there were double-digit growth in the sales of Pull.

The weakness of the auxiliary brand can be regarded as another problem of Haines and Maurice group. At present, the Swedish group decided to cut down the shops, which also weakened the physical expansion of these auxiliary brands to some extent.

Although the Swedish group still has a restructured cash flow and a good balance sheet, its net cash at SEK 2 billion 500 million ended in November, compared to 7 billion 100 million Swedish kronor in 2016, and remained stable at 17 billion Swiss francs at the end of 2012, 2013 and 2014.

In addition to the group's own strategic problems, another major mistake that H&M has seen this year is the group's blind optimism about its own expectations.

The financial year pointed out that the 42 year old young commander said that the group's revenue growth could reach 10-15% in 2017. However, since December, the group has not achieved a month's expectations and is getting worse and worse. Finally, the group released the June data in mid July and even gave up the monthly data.

The Swedish group says it will no longer make any noise for the current financial year, and the group will release a plan of pformation in February at 14 of CMD.

However, the capital market is also cautious and low expectations for the Swedish group's CMD.

UBS's report points out that the Haines Maurice group's pformation strategy in CMD is more focused on the stability of the group business than the growth plan in the air.

DNB Markets said that the pformation plan of CMD will remain to be observed, but it may be a long process.

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