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H&M works to double sales through a multichannel strategy – while more than halving its carbon footprint

The retailer is now looking to balance sales growth with sustainability. Image courtesy of H&M

H&M says it is now focused on growing via online and store expansion to double its sales by 2030 – while halving its carbon footprint.

The fashion group says it has now recovered to pre-pandemic sales levels, while profitability is higher than it has been in years and it is now focused on growth. But at the same time it aims to cut its carbon footprint by 56% based on 2019 levels.

H&M Group chief executive Helena Helmersson says that sales have returned to pre-pandemic levels while profits are better than they have been for several years – and that the group can now focus again on growth.

“The H&M group’s strong recovery continues,” says Helmersson. “Customers are showing that they appreciate our customer offering with the best combination of fashion, quality, price and sustainability. By quickly taking decisive action we have succeeded in managing the negative effect of the pandemic.”

She adds: “We see significant opportunities to grow both sustainably and profitably. The goal for 2030 is to double sales while at the same time halving our carbon footprint. Profitability is to exceed 10% over time. The H&M group’s strong cash flow and financial position will be crucial for our ability to invest in sustainable growth. In 2022 we will double the level of investment. Alongside initiatives linked to each growth area we will invest further in infrastructure such as tech and the supply chain but also in renewable energy and sustainable materials.”

In the year to November 30 2021, H&M Group reported net sales of SEK 198,967m (£15.7bn). That’s 12% higher than the previous year in local currencies, and 6% higher when converted to SEK. Online grew by 30% in local currencies and 24% in Swedish krona, to represent 32% of total sales. Germany remained its largest market, followed by the US and the UK. Profit after financial items but before tax grew by SEK105,006m(£8.3bn) from SE93,544m (£7.4bn) last time.

In the fourth quarter alone, local currency sales were 11% ahead of last time, and converted to SEK 56,813m (£4.5bn), 8% more than last time. Profit after financial items grew by 64% to SEK6,003m (£473m). Meanwhile online sales grew by 10% in local currencies and 6% in Swedish krona, despite strong comparative figures for the previous year. The strong result for the quarter, says H&M, came as collections were received well by customers, and as it moved away from discounting to higher full-price sales while controlling costs. At the same time, the cost of shipping and raw materials were “substantially higher” but the retail group has also continued to renegotiate or store leases. In 2021 it opened 104 new stores and closed 321, and plans a net decrease of about 120 stores in the coming year. Openings tend to be in growth market while it tends to close stores in its more mature markets.

The fashion group, whose retail brands include H&M, Cos, Arket, &Other Stories and Monki, says it now aims to double its sales by 2030 while more than halving (-56%) its carbon footprint on 2019, and growing profits to more than 10% of sales.

It will do that through a multichannel strategy that includes new stores and online expansion. In 2022, it will open new H&M shops in markets including Ecuador and Kosovo, and sell online for the first time in markets including Belarus, Colombia and Kazakhstan. The group also says it will step up the pace of investment “in both our physical and digital stores to elevate and strengthen the integrated experience further”.

H&M group is investing through its Co:lab investment arm in new companies that will boost its growth strategy and says they have created financial value while improving the customer experience and enabling innovation in sustainable materials. “In an industry in rapid transition exciting opportunities arise,” says Helmersson in today’s report, “and we are constantly evaluating investments and acquisitions that could contribute to the HM group’s continued sustainable growth.”

Sustainability strategy

So how does H&M plan to halve its carbon emissions by 2030?

H&M says it aims to lead the transition to a “circular, climate positive fashion as a fair and equal company across the entire value chain,” having committed at Cop26 to reduce its carbon emissions by 56% by 2030 from its 2019 baseline.

It says it will shift to 100% renewable electricity in its own operations no later than 2030 and says it will no longer start working with suppliers that use coal-based fuel. This year it will invest SEK3bn to reduce its climate footprint. It has also launched a circular design tool, The Circulator, in order to raise awareness and simplify circular design within its business and is among the leading fashion brands recognised by Oxfam for progress on improving wages in the textiles industry. It also continues to use the Higg Index tool in its business to measure the environmental impact of materials and to inform customers on how water, fossil fuels are used in its business, and the impact on global warming and water pollution. This tool can also be used to find out about many H&M products in 32 markets, and will be expanded further in 2022.

The group has worked with Ikea to understand how recycled materials can be reused, creating a database of potential uses and challenges, and using its findings to affect legislation around the circular economy.

From next month it will start selling secondhand products via its partner Sellby on the H&M website, first in Sweden and later in Germany.

It also cites a range of improvements to its shopping experience. They include rewarding shoppers for bringing in old clothes, choosing climate smart delivery options – such as bicycle delivery in the Netherlands, Sweden, Italy and France – while biogas vehicles take goods from the logistics centre. In Sweden and Norway deliveries are made to climate smart lockers.

Shoppers can rent occasional wear in some stores in the Netherlands, Sweden and Germany, and they can also use an augmented reality pilot to see what H&M homewares would look like in their home – presumably with the effect of cutting down on returns.

H&M is a Leading retailer in RXUK Top500 research.

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