Swedish retailer H&M has seen sales fall by as much as 57 % in local currency since the beginning of March, as online sales growth was impressive - but insufficient to compensate for closed stores. Inventories, meanwhile, continue to build up.
Online sales insufficient
Between 1 March and 6 May, H&M saw its sales in local currency decline by 57 % compared to the previous year. The world's second largest fashion retailer had most stores closed due to the coronavirus pandemic. Online sales increased by 32 %, but failed to sufficiently compensate the impact of the crisis.
As a result, inventories of unsold items increased to just over 41 billion Swedish crowns (4 billion euros) at the end of April, compared to 37.2 billion crowns at the end of February and 40 billion a year earlier. As early as 3 April, H&M had warned that the chain would end the quarter with a deficit for the first time in decades. Since the end of last month, stores have started to gradually reopen, but about 60 % of the outlets are still closed at present.
71 % drop in US
"In those markets that have begun to open up, trade in the stores has initially been muted", the chain said ahead of its annual general meeting, according to Reuters. In Germany, for example, the company recorded 46 % less sales in the second quarter, while in the United States the decline was as high as 71 %.
In absolute terms, the cost of markdowns in the second quarter is expected to be lower than in the second quarter of 2019, but due to the significant drop in sales, markdowns will still have a negative impact of 2 to 4 percentage points on gross margin.