H&M today said it was speeding up its pace of change towards digital, as it reported a 23% fall in sales in the first half of its financial year as Covid-19 forced most of its shops to shut. Sales halved in the second quarter of the year alone. While shops shut the fashion retailer focused online – and ecommerce sales grew by 36% during the second quarter. The retailer now plans to bring forward shop closures and scale back on openings.
In the opening weeks of the new financial year, to June 24, sales have been down by 25% in local currencies, at a time when 48 of its 51 markets are open but 350 shops (7% of the total) are still closed, and many of those that are open are subject to local restrictions and limited opening hours.
Now it plans to bring forward the closures of 170 shops, while opening 130 new stores. Overall, store numbers will fall by 40 as the retailer looks towards a more integrated, multichannel future.
H&M chief executive Helena Helmersson said: “As we have reopened our stores, sales have begun to recover at a faster rate than expected. To meet the rapid changes in customer behaviour caused by Covid-19 we are accelerating our digital development, optimising the store portfolio and further integrating the channels. With our ambitious sustainability work we want to continue to lead fashion retail towards a more sustainable future.”
She added: “During the pandemic it became clear how important it is that the digital and physical channels interact to meet customers’ needs. When the majority of the stores were temporarily closed in the second quarter, we focused on redirecting product flow to our digital channels, which remained open at all times in nearly all our online markets. Online sales increased by 36 percent in SEK during the quarter. The positive development of online sales has continued since we began reopening our stores. As the stores have reopened, our total sales have gradually begun to recover. Our pace of recovery varies greatly between markets, partly because local restrictions differ, but has so far been better than expected.”
The update came as H&M reported net sales of SEK 83.6bn (£7.12bn) in the half year to May 31, down by 23% on the same period last year. Profits after financial items but before tax came to SEK 3.1bn (£260m).
In the second quarter alone, covering all March, April and May, sales fell by 50% to SEK 28.7bn (£2.4bn) at a time when its shops were temporarily closed in many markets. In mid-April, Covid-19 lockdowns meant that about 80% of shops were closed. But at the same time, online sales grew by 36%, in SEK, and by 32% in local currencies. Profits for the quarter came to SEK 6.5bn (£600m), after administrative and selling costs fell by 25%.
The retailer, ranked Leading in RXUK Top500 research, says that its liquidity remains good, with cash amounting to SEK 12.7bn (£1.1bn), and available credit extending that to SEK 31.2bn (£2.7bn). It has also taken fast action to save money on buying stock, investment, rents, staffing and financing, but it expects to mark down spring products in the current trading period.
Commenting, Kate Ormrod, lead retail analyst at data and analytics company GlobalData, said: “H&M is known for having been late to the party when it comes to embracing online, but following heavy investment in recent years, the value player will have been better able to protect itself during lockdown than some competitors – and, in the UK, likely benefitted from Primark shoppers’ inability to buy online. The online channel accounted for 28% of group sales in H1, compared to 16% in FY2018/19. H&M’s pureplay rivals set the standard when it comes to online experience and fulfilment, leaving H&M with work to do in H2 to elevate its online offer to drive conversion and basket sizes.”