Fashion giant H&M increased its profit ninefold last year. Profitability is better than it has been in years, and sales are also back at pre-pandemic levels. So it is time for the fast-fashion giant to set new ambitions…
Despite Chinese boycott
H&M ended the year strongly, says CEO Helena Helmersson. In the last quarter sales rose by 8 per cent excluding exchange rate effects. For the full year, net sales rose by 6 per cent to 199 billion kroner (19 billion euros). The increase in profit was particularly spectacular. In the fourth quarter, net profit rose by 86 per cent. Over the full financial year net profit was as much as nine times higher than a year earlier.
Of course, this has a lot to do with the weak basis for comparison in 2020. Back then, the profit was only 1.2 billion Swedish kronor (110 million euros), compared to 11 billion kronor (1 billion euros) now. It is nevertheless the best profit figure in years, says Helmersson, who has implemented a lot of cost-cuttings and store closures. More than 200 stores were closed last year.
H&M was also hit hard by a boycott in China last year. Like many other clothing brands, the fashion group was criticised for allegedly producing clothing in forced-labour camps for Uyghurs, an oppressed Chinese minority. When H&M promised to stop sourcing cotton from the region, the Chinese got angry. The large-scale boycott had a big impact: sales fell by 40 per cent and China fell from being the third to the eighth largest market for H&M.
Hundreds more stores to close
Helmersson now says she is optimistic about the future and is setting bold goals. H&M Group wants to double sales by 2030. In the longer term, the CEO wants to return to double-digit annual growth figures. Analysts, however, only see a growth of around 50 per cent as feasible within that timeframe. This growth target is also somewhat difficult to reconcile with the sustainability ambitions the company is simultaneously announcing: the carbon footprint must halve in the same period.
To meet these targets, H&M will invest an additional one billion euros this year, mainly in technology, the supply chain, renewable energy and sustainable materials. Further cuts are also required: the Swedish group plans to close a net 120 stores this year, mainly in Europe. Helmersson also wants to reduce unsold stock, costs and markdowns.
Weekday goes wholesale
Meanwhile, the subsidiary brand Weekday is entering the wholesale market. In German-speaking countries, physical retailers will be able to buy the brand for their stores from now on, says FashionUnited. Weekday has previously worked with e-commerce platforms Zalando and Asos, but now these wholesale activities are growing further.
H&M is physically expanding into six new markets this year: Ecuador, Kosovo and northern Macedonia, and through franchising in Costa Rica, Guatemala and Cambodia. The roll-out of H&M online will continue in 2022 with Belarus, Colombia, Kazakhstan, Peru and Ukraine.
