H&M doubles its pre-coronavirus profits

H&M doubles its pre-coronavirus profits
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In the first quarter of its financial year (up to 29 February), H&M doubled its profits and increased sales by 8 %. Good news then, until the coronavirus hit the world: in March, turnover was halved.

 

Positive development before Covid

H&M experienced a very positive trend in its first quarter: profits more than doubled to 2.5 billion Swedish crowns (230 million euros), which - according to the company - indicates that its transformation efforts are bearing fruit. Gross profit grew by 10 % and resulted in a gross margin of 51 %.

 

"Our focus on the customer offering and the customer experience continued to drive full-price sales, with decreased markdowns and an improved inventory level as a result. The positive development, which began already in 2019, shows that our transformation work is effective and our long-term investments are paying off", CEO Helena Helmersson said.

 

Sales increased by 8 % to 54.9 billion crowns (5 billion euros): a 5 % growth in local currency. Online sales increased by 48 % in crowns and 44 % in local currency. In the second half of the quarter, however, sales were hampered by the rapid spread of the coronavirus, mainly in China (where sales fell 84 % in February). Excluding the regions most affected at the time (China, Hong Kong, Singapore, Macau, Japan and Taiwan), sales increased 7 % in local currency.

 

Coronavirus crisis hits hard

The eyes of most analysts are now focused on the second quarter, during which the coronavirus has arrived in Europe and the Americas. As of 31 March, 3778 of the 5065 stores were closed, representing a 46 % drop in net sales for the month of March. The decrease was only partially absorbed by online sales, which increased by 17 %. The second quarter will be loss-making, Helmersson predicts. 

 

H&M is taking numerous measures against the coronavirus crisis and its economic impact: the fashion giant is negotiating rents with all of its store owners and in order to secure liquidity, the group is also expanding credit facilities. In addition, planned investments will be reduced or postponed. 

 

As previously announced, a series of mass redundancies is also to be expected. Finally, shareholders will not receive a dividend this year, while the company's senior management will forego 20 % of their salaries. Meanwhile, H&M factories are manufacturing protective clothing for healthcare workers and the H&M Foundation is donating money to the World Health Organisation.