H&M has suffered a slump in full-year earnings after what its chief executive described as a “challenging year”.

The fashion giant’s pre-tax profits tumbled 21% year-on-year to SEK12.6bn (£1bn) during the 12 months to November 30, 2018.

However, H&M’s net sales grew 5% to SEK210.4bn (£17.7bn) across the same period. The retailer said the increase was driven by “ongoing transition work” and strong ecommerce sales.

Like-for-like online sales jumped 22% compared to the previous year and made up 14.5% of the group’s total revenues.

H&M boss Karl-Johan Persson said: “It has been a challenging year for H&M group and the industry, but after a difficult first half, there are signs the company’s transformation efforts are beginning to take effect. Improved collections generated better full-price sales and lower markdowns towards the end of the year.

“This gave us confidence to accelerate our transformation plans in the fourth quarter with a particular focus on the upgrade of our logistics systems. Inevitably resulting in increased costs but will lead to a range of improvements for customers.”

The group plans to open a net 175 new stores in the current year.

H&M also said that markdowns during the first quarter of 2019 would be 1 percentage point lower following “stronger collections and increased full-price sales” during the three-month period.

H&M profits slump in 'challenging' year