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H&M Sales Slide 27% as More Stores Emerge from Lockdowns

H&M Group has revealed its provisional first-quarter results, and while it appears the fast-fashion giant still faces hurdles aplenty, it is finally starting to see the light at the end of the tunnel.

Quarterly net sales fell 27 percent from a year earlier, or 21 percent measured in local currencies, to 40 billion Swedish kronor ($4.7 billion). The numbers did surpass estimates from analysts polled by Refinitiv, which on average predicted a 30 percent net sales decline, but are worse than the company’s fourth quarter, in which sales fell 15 percent to 52.6 billion Swedish kronor ($6.3 billion).

The second quarter is off to a much better start, with sales from March 1-13 increasing by 10 percent in local currencies on year-over-year basis.

The Swedish retailer was one of many fashion chains battered by the continued lockdowns throughout Europe, with more than 1,800 of its approximately 5,000 stores being shuttered at one point during the first quarter. By the end of the period on Feb. 28, around 1,300 stores remained temporarily closed, as a number of markets gradually allowed stores to reopen.

By March 13, approximately 900 stores were closed, with Germany being the main market reopening nonessential retail.

H&M said that amid the store closures, online sales have continued to develop “very well,” but the company did not give a hard figure or an estimate of how much growth took place. In the prior quarter, online sales grew 50 percent. For all of 2020, online sales jumped 38 percent in local currencies, representing 28 percent of H&M’s total sales for the full year.

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On March 31, the retailer will reveal its full report for three-month earnings between Dec. 1, 2020 and Feb. 28, 2021. The company did not give an earnings estimate, but anticipates a loss in the quarter after the pandemic slashed 2020 profits by nearly 91 percent to $149.2 million.

Chief competitor Inditex, the parent company of Zara, saw its own net income drop nearly 70 percent, but still managed to pull in approximately $1.3 billion. H&M has Inditex beat in March so far when it comes to sales growth as stores reopen. While H&M was up 10 percent during March 1-13, Inditex sales remained down 4 percent from March 1-7.

To close 2020, H&M reaffirmed its plans to shutter 350 stores while opening 100 this year, and said it will increase digital investments to foster online-offline integration. Most closures will affect established markets, while new stores will arrive in growth markets.

The group, which operates Cos, Monki, & Other Stories, Arket and Weekday in addition to H&M, has been cutting costs and renegotiating leases for its retail network since the pandemic struck. Last year, it closed 187 stores and opened 129.

In the near term, the fast-fashion giant will have a go at it without garments sourced in Myanmar, where upwards of 60 people have been killed in a series of deadly crackdowns against protestors since a Feb. 1 coup returned the country to full military control.

H&M, which works with 56 supplier factories in the country, said it won’t be placing new garment orders “at this point,” noting that its ability to conduct business in the country has been hampered by the challenges related to manufacturing and infrastructure, raw material imports and the transportation of finished goods.

Serkan Tanka, H&M group country manager, Myanmar, said the retailer will continue to take full delivery of and pay for all already placed orders.

H&M has not given guidance for 2021, but says that it plans to increase sales in local currencies by 10 to 15 percent each year.