The hits just keep on coming.
A week after H&M was plunged into a Beijing-sanctioned news and social-media firestorm for raising concerns over reports of forced labor in the Xinjiang Uyghur Autonomous Region of northwest China, the Swedish retailer underscored its desire to “be a responsible buyer, in China and elsewhere” even as it works to regain the “trust and confidence” of its Chinese customers, colleagues and business partners.
In a statement published Wednesday alongside its first-quarter earnings, the world’s second-largest apparel purveyor after Zara owner Inditex said it is working to “do everything we can to manage the current challenges and find a way forward.”
“China is a very important market to us and our long-term commitment to the country remains strong,” the statement, which did not reference Xinjiang or the Uyghur people, noted. “We want to be a responsible buyer, in China and elsewhere, and are now building forward-looking strategies and actively working on next steps with regards to material sourcing. Together with all relevant stakeholders, we want to collaborate to be part of the solution and jointly build a more sustainable fashion industry.”
H&M made no explicit mention of forced labor, instead noting that it complies with local laws and regulatory frameworks in the markets where it operates.
“Our company values are built on trust, respect, integrity and dialogue,” it added. “We wish to focus on our core business and on what we do best—bringing fashion and design to our customers all around the world.”
Some 20 of H&M’s 500-plus stores in China are now closed as part of a larger “cancellation” campaign that wiped the retailer from the nation’s e-commerce websites and apps and drove celebrities such as Huang Xuan and Victoria Song to rip up lucrative endorsement deals with the company.
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The fracas began on Wednesday after Chinese netizens resurrected a months-old statement from H&M that said it would no longer procure cotton from Xinjiang due to “deep concerns” about “reports from civil society organizations and media that include accusations of forced labor and discrimination of ethno-religious minorities.” In September, H&M cut ties with a mill in the Shangyu district of Zhejiang run by Huafu Fashion Company, a yarn producer linked to forced Uyghur labor.
“Spreading rumors to boycott Xinjiang cotton while trying to make money in China? Wishful thinking!” China’s influential Communist Youth League wrote on Weibo, the nation’s version of Twitter. In another post, the group said that Xinjiang cotton “won’t accept this.” Other comments called for H&M to exit China, with one Weibo user writing, “I heard that you are boycotting Chinese cotton, then I will boycott your products.”
Chinese netizens didn’t appear to accept H&M’s olive branch. A hashtag that translates to “H&M’s newest statement doesn’t mention Xinjiang” has popped up on Weibo. A trending post by Guangzhou Daily, the official newspaper of the Guangzhou Municipal Committee of the Communist Party of China, called the statement a “second-rate public relations article full of empty words and lack of sincerity.” A user named Huang Shengyou accused H&M of “playing word games, that Chinese netizens do not understand English. It is wishful thinking to still want to make a lot of money in China.”
The Global Times, a state-run newspaper, warned in a story Wednesday that the statement can “hardly win the forgiveness of Chinese people,” and that H&M may “face more stores being shut down in the coming days due to lost consumers.”
Though the financial impact of the boycott remains to be seen, China, with its 1.4 billion consumers, is a critical market for H&M, accounting for 5 percent of its global sales, or $1.1 billion in 2020.
Meanwhile, net sales for the company tumbled 21 percent in the three months through February to 40.06 billion Swedish kronor ($4.59 billion) due to “extensive restrictions” from the second wave of the coronavirus pandemic that saw roughly 1,800 stores—or 36 percent of its total base—shutter temporarily. Sales perked up 55 percent, however, between March 1-28 compared with the same period last year. Digital sales, CEO Helena Helmersson said, have continued to “develop very well.”
“It is now a year since the full force of the pandemic hit. I am deeply impressed by and proud of all our colleagues’ fantastic commitment and customer focus during a very challenging time,” Helmersson said. “Although it is still largely a matter of managing the negative effects of recurring store closures, it is clear that customers appreciate our offering. When markets have been allowed to open, store sales have picked up while at the same time online sales have continued to develop very well.”