H&M closes 240 stores despite returning to profit

The Swedish H&M Group is one of the first to show the consequences of the war in Ukraine. Its first quarter was disappointing (despite a return to profit) and so the fashion retailer feels forced to close another 240 shops.

War costs 4 % of profit

Like many retailers, H&M Group has shut down its operations in Russia, Belarus and Ukraine since the outbreak of the war. This has had immediate consequences: in the first four weeks of March, net sales rose by just 6 % in local currency terms, which is significantly less than in the first quarter.

In the first quarter of its broken financial year, which ended at the end of February, the fashion group still recorded 18 % more turnover than a year earlier. Excluding currency effects, sales even increased by 28 %, amounting to 49.17 billion Swedish crowns (4.67 billion euro). However, Russia was the company’s second largest market and accounted for 4 % of all sales. In total, 185 shops are now closed, while elsewhere 42 shops are closed due to corona.

240 stores close

Without the closures in Russia, Ukraine and Belarus, sales in March would have grown by 11 %. H&M now has problems in two of its biggest markets, the Financial Times noted: earlier, the group faced a boycott in China when the fast-fashion player stopped sourcing cotton from the Xinjiang region, where China’s Muslim minority Uighurs would be forced into forced labour.

It also led the Swedes to permanently close shops: for this year, H&M Group plans to open 95 new shops (mainly in new markets in South America and Eastern Europe), but also to close 240 shops. Ultimately, the group will therefore end the year with about 145 fewer shops. The closures are mainly in established markets, although the company does not yet say where.

Winst valt tegen

For the first quarter, H&M was able to announce positive profit figures, but even that joyful news did not meet expectations. Net profit amounted to 217 million crowns (21 million euros), which is significantly less than the 89 million euros that analysts had expected.

The disappointing profit was due to the flare-up of the coronavirus between November and February, while the group also made substantial investments in technology and logistics at the start of the new year, CEO Helena Helmersson explained. In the first quarter of last year, the Swedish clothing retailer still posted a loss of 1.07 billion crowns (100 million euros).