H&M aims to win back consumers after sales slump

Despite a sales drop of 2 %, H&M CEO Daniel Ervér is pleased with the increase in profits and gross margin. The fashion giant plans to reduce the number of its shops by sixty units this year.

Falling costs

In its first quarter (1 December to 29 February), the Swedish group achieved net sales of 53.7 billion crowns (4.7 billion euros). Nonetheless, Ervér believes that his fashion giant has developed in the right direction, focusing mainly on profitability.

Gross profit rose by 7 % to 27.7 billion Swedish crowns (2.4 billion euros), corresponding to a gross margin of 51.5 %. Operating profits even rose 186 % to 2.07 billion Swedish crowns (200 million euros), equivalent to a threefold increase in the profit margin to 3.9%.

Ervér boasts he managed to reduce costs, mainly through efficiencies in the supply chain. Although the group still sources most of its products from the Far East, H&M also wants to produce closer to home and invests in nearshoring. However, the group admits that some of the cost reductions have come naturally through lower raw material and transport costs than last year.

Investing in shops

The H&M Group realises that the time has come to boost sales: improving the customer offer, the shopping experience and the supply chain are now top priorities. For example, the retailer wants to lower its prices, particularly in the United States.

The fast-fashion player also wants to reinvest in its physical shops, renovating 250 shops this year. Particular attention will be paid to major cities such as London and New York, “to rebuild credibility” with consumers. In total, H&M plans to open around 100 new shops, while closing 160 this year, meaning a net reduction of sixty.

At the same time, H&M has published its sustainability report for 2023. Last year, its greenhouse gas emissions fell by 22 %, while 85 % of the materials used were recycled or sustainable. The new ambition is to use 50 % recycled materials by 2030, compared with 25 % today. With this in mind, the H&M group has co-founded Syre, which aims to develop the recycling of polyester from textile to textile. The aim is to close the loop, moving from virgin polyester and rPET to a circular alternative.