H&M’s Sales Tumble, Stockpiles Grow In March To May

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H&M warned on April 3 it would make its first quarterly loss in many decades in March-May, its fiscal second quarter.

H&M, the world’s second-biggest fashion retailer, said local currency sales had tumbled 57% since the start of March compared with a year ago as the Covid-19 pandemic and lockdowns kept most of its stores closed. Online sales grew 32%, it said, covering the trading period from March 1-May 6.

H&M warned on April 3 it would make its first quarterly loss in many decades in March-May, its fiscal second quarter. It has started to gradually reopen stores from late last month but 3,050 or 60% remain temporarily closed. “In those markets that have begun to open up, trade in the stores has initially been muted,” it said.

H&M said its inventories of unsold goods had grown to just above 41 billion Swedish krona (US$ 4.2 billion) at the end of April, from 37.2 billion Swedish krona at the end of February and 40 billion krona a year earlier. It had flagged last month that stocks would temporarily grow due to the sudden drop in demand linked to the pandemic.

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“Costs for markdowns are expected to decrease in absolute figures in the second quarter compared with the second quarter of 2019, but since sales will be significantly lower, the markdowns are expected to have a negative effect on the gross margin of 2-4 percentage points,” it said.

Germany, its single-biggest market, on Wednesday announced steps to ease its lockdown. In Germany, sales were down 46% so far in the second quarter, while in second-biggest market the United States they were down 71%, the group said.

H&M set to permanently close eight shops in Italy
H&M is set to permanently close eight of its Italian stores, including two in the country’s fashion capital Milan, as it pushes ahead with plans that pre-date the Covid-19 pandemic.

The outbreak has forced the world’s second biggest fashion retailer to temporarily close stores in more than a dozen markets, including all its shops in Italy. After seven weeks of stringent lockdown measures – during which all businesses not deemed essential were forced to close- clothing retailers in Italy are allowed to open again on May 18.

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But H&M has told unions that two of its biggest shops in Milan and one in the southern city of Bari will never reopen their doors. Between August and November it also intends to permanently close shops in the northern cities of Udine, Vicenza, Bassano del Grappa, Gorizia and in the Tuscan town of Grosseto.

“The decision to close is linked to the economic sustainability of each specific store,” a spokeswoman for H&M in Italy said.

H&M has been spending heavily to revive its business after years of falling profits and growing inventories due to slowing sales at its core H&M branded stores. It is in the process of closing some H&M-brand stores across Europe and opening new ones mainly in emerging markets.

The eight Italian shops set to shut employ some 200 workers in total who cannot be laid off under current emergency measures in the country, which is battling Europe’s deadliest coronavirus outbreak.

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Gennaro Strazzullo, a member of the UIL national union said the company had not indicated the coronavirus emergency was a reason for its decision. “The company said the closures are necessary to guarantee the long-term sustainability of the firm, but the group is not struggling and their balance sheets are good,” he told Reuters, after a meeting between unions and the company on the matter.

Strazzullo said unions were aiming to get some of the workers moved to other jobs with the Swedish group in Italy. At the end of its 2019 fiscal year, at end-November, H&M had 181 stores in Italy and a turnover of 8.40 billion Swedish krona (US$ 849.62 million) in the country.

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