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H&M Sales Feel Heat of COVID-19, Tanking 57% Since March

The COVID-19 pandemic has undoubtedly hit fashion and apparel hard, and the sector’s top players are no exception.

H&M Group’s total sales between March 1 and May 6 have plummeted 57 percent compared to the same period in 2019, with the global fashion giant warning that the poor performance would mark the company’s first quarterly loss in decades.

“Of course, we believe that this situation will affect us for a long time and it will be a long time before we’re back to a normal business again,” said Helena Helmersson, CEO of Hennes & Mauritz AB in a video interview posted on hmgroup.com. The sentiment from Helmersson is not unlike apparel retailers based in the U.S., with 27 percent saying they don’t foresee sales recovering to pre-COVID levels until the second quarter of 2021 at the earliest, according to a CommerceNext survey.

H&M has adjusted product purchasing and purchasing plans, and has scaled back investments for 2020 including capital expenditures, Helmersson said, such as 20 percent pay cuts for senior executives first announced in March.

“Rental costs have been reduced through dialogue with landlords and partners,” Helmersson said. “Regrettably, we’ve also been forced to reduce working hours in affected markets. We’re reviewing all costs in the company, and have shown that we’re able to reduce operating costs quite fast.”

Inventories of unsold goods had grown to more than 41 billion Swedish krona ($4.2 billion) at the end of April, up from 37.2 billion ($3.8 billion) at the end of February.

H&M started gradually reopening stores in a number of markets toward the end of April, in line with local restrictions and social distancing rules. Currently, 3,050 stores, representing 60 percent of the group’s 5,061 stores, are still closed as of May 7, a significant improvement over the peak of approximately 4,000 store closures.

South Korea, which flattened the coronavirus curve early on, was the best-performing market for H&M, with just an 11 percent sales decline. Sweden (31 percent decline) and China (32 percent decline) had the second- and third-softest losses.

On the other hand, H&M’s worst performances unsurprisingly came in hard-hit Italy, which saw an 80 percent decrease in sales, followed by Spain’s 76 percent decline. Revenues in U.S. and France both dipped 71 percent. The retailer is set to permanently close eight of its Italian stores by the end of the year, including two in the country’s fashion capital of Milan, although these plans were made prior to the pandemic. The shops employ approximately 200 workers in total who cannot be laid off under current emergency measures in the country.

On a more positive note, H&M has taken advantage of the e-commerce market where it can even after halting production in mid-March, seeing online sales increase 32 percent since March 1. Recently, as part of the company’s renewed focus on digital, H&M launched a new internal business tech organization designed to gradually replace the previous functions for IT, advanced analytics and AI, and business development.

“It will increase our speed, flexibility and efficiency,” Helmersson said in the interview. “That will enable even stronger customer focus. In terms of investments, we’ve done a lot within our tech infrastructure and we’ve invested in new logistics systems. We’ve also opened a new high-tech logistics center in Milton Keynes in the U.K. to supply both stores and online.”

Earlier this week, the fashion retailer announced that its digital fashion marketplace Afound was expanding into Austria and Germany.

Launched in Sweden in 2018, the online platform and store chain first opened elsewhere to shoppers in the Netherlands in October. The platform carries overstock shoes, clothes and lifestyle products from hundreds of men’s and women’s labels.

In April, H&M announced it had secured a 980 million euro ($1.1 billion) revolving credit facility to help cushion its business amid the crisis. The yearlong bank facility came with the option of a six-month extension.

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