H&M pays a high price for recovery

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H&M Group has also been hit hard by the second lockdown wave: in 2020 profits plummeted 88 per cent, while sales were down 18 per cent. Crisis management in times of the coronavirus is costing the fashion giant dearly.

 

Sales better than expected

H&M Group sold 187 billion Swedish kronor (18.47 billion euros) worth of clothes in its last financial year, which ended in November 2020. That is 18 per cent less than what the Swedes sold during pre-corona times. A windfall, considering the group had to close 80 per cent of its stores worldwide last spring. Quick decisions, a strong and profitable online growth and good cost control led to a better than expected recovery, according to CEO Helena Helmersson.

 

Nevertheless, the cost of those recovery measures was high. The group ends the year with 16,000 fewer employees and plans to close another 350 stores in 2021. However, 100 new stores will be opened in turn. Above all, pre-tax profits plummeted 88 per cent from 17.4 billion Swedish kronor (1.72 billion euros) to just 2.05 billion Swedish kronor (around 200 million euros). Nevertheless, the group is pleased to end the year profitably and with a strong cash position.

 

"Speed becomes even more important"

In the fourth quarter, the group was on the right track, until the second wave abruptly put an end to the recovery. Net profit fell from 4.21 billion Swedish kronor (420 million euros) to 2.49 billion Swedish kronor (250 million euros). Due to new lockdowns in many countries, sales also fell by 15 per cent, while online sales rose by 50 per cent at the same time.

 

In the current financial year, H&M expects to suffer further from the Covid-19 crisis, especially during the first quarter: currently, around 36 per cent of all stores are closed, and sales were 23 per cent lower during the end-of-year season and sales period (1 December to 27 January). Nonetheless, H&M believes to be in a strong position, also financially.  

 

"We will continue our initiatives on digital growth, channel integration and store portfolio optimisation. Speed and flexibility will become even more important in the upcoming period, especially in the supply chain, to ensure the best offer for the customer and increase availability in all channels," Helmersson said.