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H&M Laying Off ‘Tens of Thousands’ While Primark Halts New Factory Orders

The reality of the coronavirus pandemic is hitting home for H&M Group, Primark and Laura Ashley.

The Swedish fashion heavyweight and Primark parent Associated British Foods are each scrutinizing operations to figure out they can shore up bottom lines made increasingly shaky by outbreak-driven store closures and sagging consumer demand. British label Laura Ashley, meanwhile, is searching for a buyer as it enters “administration,” the company shared on Twitter Monday.

H&M

With more than 5,000 stores in 74 markets, Hennes and Mauritz has a lot of assets—and a lot at stake. As such, the fast-fashion purveyor is reviewing all parts of its operations, including all costs, H&M Group said on Monday. “Several measures are being taken in respect of buying, investments, rents and staffing, among other areas. The situation is being reviewed market by market based on local conditions,” the company said.

H&M has begun laying off employees temporarily, a move that is expected to expand broadly—and not just at the store level where closures have rocked the sector.

“Dialogue about temporary layoffs has been initiated in a number of markets and will be followed by further temporary layoffs in other markets that are impacted by the corona situation,” H&M said. “Globally, this is likely to affect tens of thousands of employees in all part of the business, although it is not currently possible to specify the exact number.”

Some layoffs could be permanent, thanks to uncertainty surrounding how long the pandemic could last.

A total of 3,441 of the group’s 5,062 stores are currently closed because of the coronavirus, “which together with subdued demand in the markets that are still open, has had significant negative impact on sales so far in March,” the company said.

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H&M plans to provide more information on the impact of COVID-19 during the current trading period when it provides its quarterly report on April 3.

Separately, the company also said it plans to scrap its dividend payment to shareholders this year. “I am convinced that this is the best decision in this situation in order to further strengthen the company’s already strong financial position and thereby secure our freedom of action going forward,” Stefan Persson, chairman of H&M’s board, said.

The move will help H&M hoard cash as the company’s awaits clarity on the coronavirus outbreak, which the Centers for Disease Control and Prevention expects could last for several months stateside.

“We are doing everything in our power in the H&M group to manage the situation related to the coronavirus…. This is an extraordinary situation in which we are forced to make difficult decisions, but with every challenge there are also opportunities and I am convinced that we as a company–once we have made it through this–will continue to stand strong,” CEO Helena Helmersson said.

Primark

On Monday, Primark’s parent company ABF said it temporarily closed stores in United Kingdom stores over the weekend, which represent 41 percent of sales. This means all 376 Primark stores in 12 countries are now closed until further notice and represent a loss of 650 million pounds ($750.7 million) in net sales per month.

In trying to mitigate the impact from lost sales, the company said a “variety of work streams have been established,” and that all expenditures are being reviewed. ABF has reduced all discretionary spend, and is “making good progress” in reducing fixed costs like negotiating rent with landlords. The company expects to recover about 50 percent of total operating costs.

“To manage Primark stock we have also regrettably informed suppliers that we will stop placing new orders,” ABF said.

ABF’s other businesses in sugar, grocery, ingredients and agriculture have not seen any material impact, confirming the consumer trend toward stockpiling outbreak essentials. “The group has a strong balance sheet, substantial cash liquidity with some 800 million pounds ($923.9 million) of net cash at the half year, together with a revolving credit facility of some 1.1 billion pounds ($1.27 billion),” it said.

Laura Ashley

“This is a sad time for Laura Ashley UK as we step into administration,” the British apparel and home retailer Laura Ashley tweeted Monday, adding “we remain confident there is a buyer out there who will work with us…to restore this iconic brand to greatness.”

Roughly half of Laura Ashley’s 147 stores are set to close, victims in part of the COVID-19 pandemic on top of retail’s longstanding troubles. The retailer confirmed from its Twitter account that 77 stores remain open for the time being, although that’s subject to change. PwC is said to be handling the company’s bankruptcy proceedings.

Both firms, like many others, have global operations and are hard hit from the necessity of closing retail stores as countries are telling citizens to practice social distancing to slow–and hopefully stop–the spread of the coronavirus, also known as COVID-19.