H&M Group plans to shut 250 stores over the next year and invest further in omnichannel, as it responds to changing customer behaviour during the Covid-19 pandemic. The retailer, which at one point saw 80% of its shops shut temporarily during pandemic lockdowns around the world, says it is now seeing “strong, profitable online growth” while more of its stores have been able to reopen. In the third quarter of the year it turned a profit for the first time since the pandemic.
H&M today reported sales of SEK 50.9bn (£4.8bn) in the third quarter of its financial year, to August 31, compared to the same time last year. That’s down by 16% on the same time last year, reflecting the fact that about 900 of more than 5,000 shops were temporarily closed for Covid-19 lockdowns at the beginning of the quarter, as were more than 200 at the end of the quarter. Online sales grew, in SEK, by 27%. At the bottom line, the retailer reported its first gross profit since lockdown started, of SEK 24.8bn (£22.3bn), with profits after one-off items coming to SEK 2bn (£221.9m).
In the first nine months of H&M Group’s financial year, its net sales came to SEK 134bn (£12.7bn). Losses after one-off costs came to SEK 1.6bn (£151m).
In the current quarter, September sales are down by 5% in local currencies compared to the same time last year, while 166 shops – 3% of its estate – are still closed, while many are operating under local restrictions and limited opening hours.
“Through much-appreciated collections and rapid, decisive actions, we returned to profit already in the third quarter,” said H&M Group chief executive Helena Helmersson. “Our employees have made amazing efforts to achieve our fast recovery. Although the challenges are far from over, we believe that the worst is behind us and we are well placed to come out of the crisis stronger. Demand for good value, sustainable products is expected to grow in the wake of the pandemic and our customer offering is well positioned for this. We are now accelerating our transformation work so that we continue to add value for our customers.”
Profits have come as the retailer managed the crisis through cutting costs in areas from product purchasing to investments, rents and staffing, while seeing its omnichannel model return a profit.
H&M is now stepping up the pace of its digital transformation, in which it expects to further integrates stores and digital, while closing a planned 250 shops during 2021 as leases end or come up for renegotiation. This, it says, reflects rapidly changing customer behaviour that has been accelerated by Covid-19.
Helmersson said: “More and more customers started shopping online during the pandemic, and they are making it clear that they value a convenient and inspiring experience in which stores and online interact and strengthen each other. The substantial investments made in recent years have been very important for our recovery and we are now accelerating our transformation work further to meet customers’ expectations. We are increasing digital investments, accelerating store consolidation and making the channels further integrated. To ensure that our offerings are relevant to customers and improve availability in all channels, speed and flexibility will be even more important in the future, particularly in the supply chain.
“Covid-19 has also highlighted the importance of sustainability. Demand for good value, sustainable products is expected to grow in the wake of the pandemic and our customer offering is well positioned for this. Through our work to become circular and climate positive we are increasing the share of sustainable and renewable materials and we are developing new revenue streams. Together with our accelerated transformation work, this will strengthen resilience and contribute to long-term profitable growth for the H&M group.”
The retailer also said today that its group brands, from COS, Weekday, Monki, & Other Stories and Arket, would launch online in Russia in response to high levels of demand. That will be followed by a launch in Switzerland.