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H&M says previous investment in digital helped it turn a profit during the Covid-19 pandemic

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Image courtesy of H&M
Image courtesy of H&M
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H&M says previous investment in digital helped it turn a profit during the Covid-19 pandemic

H&M says the work it has done in recent years to enable shoppers to buy where, when and how they choose has stood it in good stead during the Covid-19 pandemic. The retailer today reported a profit for its latest financial year, despite lockdowns that meant up to 80% of its stores had to close temporarily at the beginning of the year. But it says it will close about 350 shops over the coming year in its more established markets, while opening about 100 new ones. H&M currently has about 5,000 shops around the world.

 

Digital sales have helped to compensate for store closures and restrictions during the year and stores will remain key to its multichannel straegy. retailer says it is increasingly integrating online into its physical stores. It plans to open about 100 new stores over the coming year, but to close about 350 shops mainly in established markets.

 

H&M Group chief executive Helena Helmersson says: “The recent years’ transformation initiatives and investments, focusing on the digital, have been especially important for managing the crisis and this work is continuing at full speed. Customers want to meet us where, when and how they choose – in the stores, on our websites, on digital marketplaces and on social media. They are showing us clearly that they appreciate a convenient and inspiring experience in which the channels interact and strengthen each other. We are continuing our initiatives for digital growth, integration of the channels and optimisation of the store portfolio. Speed and flexibility will be even more important going forward, particularly in the supply chain, to ensure the best customer offering and increase availability in all channels.”

 

H&M today reported sales of SEK187,031m (£16.4bn) in its latest financial year, to November 30 2020. That’s down by 18% in local currencies from the same time last year. Sales were hit as stores closed during pandemic lockdowns. In the second quarter of its financial year – March to May 2020 – about 80% of its estate of about 5,000 shops were closed. Profits after one-off costs and before tax came to SEK2,052m (£179.5m), down from SEK17,391m (£1.5bn) last time.

 

In the fourth quarter of the year – September to November – alone, sales of SEK 52,549m (£4.6bn) were 10% down on last time as new restrictions came into place. At most, just over 20% of stores closed for different periods during the quarter.

 

Helmersson says strong profitable online growth and cost control helped the retailer to turn a profit during the year. “Taking decisive measures quickly, combined with an attractive customer offering, led to a better recovery than expected up until the second wave of the pandemic struck. Our measures to mitigate the negative effects of ongoing restrictions and closures are continuing. Although the situation at the time of writing is highly challenging, the H&M group stands strong.

 

In the early weeks of H&M’s current financial year, when around 36% of its stores were at some point temporarily closed, sales fell by 23% between December 1 and January 27 compared to the same time last year.

 

Sustainability

 

H&M now plans for 100% of the products it sells to be recycled or come from sustainable sources by 2030 – and 25% by 2025, and it plans to issue sustainability bonds in order to finance this transition.

 

“Our key focus remains on developing strong, unique brands in order to always offer the best combination of fashion, quality, price and sustainability,” says Helmersson. “The percentage of recycled and sustainable materials in the collections is consistently increasing and our brands are offering an ever-growing range of services for a more sustainable lifestyle. Together with our transformation initiatives this will help increase our resilience and adaptability and will contribute to sustainable and profitable growth for the H&M Group.”

 

Commenting, Emily Salter, retail analyst at data and analytics business GlobalData, says: "The group’s previous strategic plan of focusing on online, increasing the efficiency of its supply chain and the fine-tuning of its physical network was the right strategy, but if it had been put in place earlier it could have better mitigated the impacts of Covid-19. Optimising its store estate will be key in FY2020/21, with a net 250 stores expected to close versus only 58 net closures in FY2019/20. The focus needs to be on elevating its remaining stores, as well as more closely associating them with one of H&M’s other priorities: sustainability.

 

"Though it sometimes comes under fire for greenwashing, H&M has benefitted from its strong stance on sustainability and ethics and will continue to do so. Its stores could be used to create sustainability hubs to boost its reputation and footfall, bringing together its innovations such as resale (COS Resell launched in September 2020); Looop, its garment recycling system; and clothing repairs.”

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