H&M has reported sales of SEK 54.9bn (£4.33bn) in the first quarter of its financial year. That’s a rise of 8% – or 5% in local currencies – with online sales up by 48% (44% in local currencies). Profits before tax but after one-off costs more than doubled to SEK 2,504m (£197m) from SEK 1,043m (£82m) a year earlier.
But the retailer said while sales had grown in the three months to February 29, they then dropped as the Covid-19 virus emerged. It continued to sell online in 47 of its 51 markets and ecommerce sales grew by 17% in local currencies in March 2020. However, that could not compensate for the temporary closure of 3,778 of its 5,065 stores and, overall, net sales fell by 46% in March 2020 compared to the same time last year. In China, however, demand has started to recover, with almost all of its shops now open and sales now increasing gradually.
H&M chief executive Helena Helmersson said: “The strong improvement in profit in the first quarter shows that customers appreciate our assortment and that our transformation work is having a good effect. The outbreak of coronavirus and the extraordinary public measures taken to reduce the spread of the virus have put people, communities and companies in an exceptional situation.
“The safety of our employees and customers is our highest priority and we are cooperating fully with the authorities. We are working very hard to manage this challenging situation in the best possible way, and in view of the dramatic decline in the market we have to make difficult decisions and take forceful action. However, I am convinced that as a company – once we are through this – we will continue to stand strong.”
The company proposes to cancel the shareholder dividend this year, and senior executives have taken a temporary 20% pay cut. It is also implementing reduced working hours in markets affected by coronavirus that are set to affect tens of thousands of employees across its business, and it is looking at whether any redundancies will be needed. It is also deferring and scaling back future investments, talking to its landlords on rents, and expanding its credit facilities. It has temporarily switched parts of its suppliers’ production to making personal protective equipment for hospital staff and is contributing to the Covid-19 Solidarity Response Fund, started by the WHO.
Looking to the future, the retailer expects that the pandemic will lead to a more digital and sustainable world.
Helmersson said: “All this will also speed up the transformation already taking place in our sector. We believe that the major changes in consumer behaviour we are now seeing will further increase the digitalisation of society as well as the focus on sustainability – areas that remain very important to us. Right now, we are acting based on the very rapid changes in the world around us while also ensuring that we have the best customer offering. Our strong earnings trend until hit by the corona situation shows that we have a firm foundation. With our committed employees, strong culture and unique brands I am convinced that, once we are through this, we will still stand strong as a company.”
Commenting, Kate Ormrod, lead retail analyst at data and analytics company GlobalData said Covid-19 was a “true baptism of fire” for the new chief executive. She said: “Protecting the business is a priority but just as it continues to lead the way on sustainability H&M has opportunity to set itself apart from other fast fashion retailers by setting the standard when it comes to treating stakeholders ethically amid the crisis.
“Promising is the news that while H&M has halted new orders, it has committed to accepting goods and paying suppliers in full for orders already met or in production – in contrast to Primark. Producing PPE equipment and making donations is commendable, but all eyes are on how H&M treats its thousands of workers, with reduced working hours and temporary lay-offs already enacted and redundancies remaining on the table.
H&M is a Leading retailer in RXUK Top500 research.
The update comes as UK fashion retailer Arcadia Group, which owns brands including TopMan, TopShop and Burtons, said yesterday that most of its head office staff will be furloughed from Sunday, joining store staff who were furloughed from March 21. Only essential staff are still working, the senior leadership team is taking a pay cut of between 25% and 50%, and chief executive Ian Grabiner says he will take no salary or benefits until further notice.
Online operations are continuing but at a reduced capacity, with strict safety measures in place to ensure that staff in distribution centres are protected.
Grabiner said: “The health and wellbeing of our employees, customers and communities remains paramount. The actions we have taken are essential in order that we can manage our business through these unprecedented times. We are grateful for the support and understanding of our staff and all of our stakeholders during this incredibly challenging time. We look forward to opening our store doors again as soon as it is safe to do so and welcoming back our colleagues and customers.”
TopShop is a Top500 retailer in RXUK Top500 research, while TopMan is Top150.
Image courtesy of H&M