H&M swings back to loss in first quarter and responds China boycott

Covid-related restrictions continue to hit H&M results. In the first quarter, ended February, the company swung back to the red, with losses of SEK 1,070 million (104 million euros). Sales, as it had already anticipated in mid-March, plunged by 27%.

The group stresses that the second wave of the pandemic resulted in “extensive restrictions.” Up to 1,800 stores, 36% of its total network, were closed during the period. As of March 30, 1,500 stores were still affected by the closures.

Gross profit stood at SEK 19,057 million (€ 1,861 million), compared to SEK 28,034 million (€ 2,738 million) in the same period of the previous year. Profit after tax was also negative, standing at SEK 1,070 million (104 million euros), versus a profit of SEK 1,928 million (188 million euros) in the first quarter of 2019.

H&M net sales decreased by 27% in the first quarter

Although for H&M this is the first quarter of fiscal year 2021, this period is also the last that will not be conditioned by the low comparable base of the year of the pandemic. In March, on the other hand, the company’s sales soared 55%, since in March 2020 it had already begun to close the stores in Europe.

During the period, the group issued 500 million euros in bonds linked to its sustainable goals. The objective is to finance, among other projects, the transition towards sustainable materials. The bond was 7.6 times oversubscribed.

“With a well-positioned customer offering we are continuing our transformation at full speed to create long-term sustainable and profitable growth for the H&M group,” said Helena Helmersson, CEO, who once again emphasized the two keys of the strategic plan: digitization and sustainability.

The company will continue to reorganize its physical retail network with 350 closings during this year and one hundred openings in 2021

H&M also continued its expansion through online, opening its e-commerce platform in Qatar via franchise and launching on the Zalora platform in Indonesia. In April, it also plans to reach the Philippines, Malaysia and Singapore through the Rocket Internet platform. During the period, the group’s online sales soared 48%.

The company will also continue to reorganize its physical retail network with 350 closings during this year and one hundred openings. “The current situation has changed the conditions for rentals; the group continues to renegotiate a good number of rents as part of the store optimization plan, "says H&M, who recalls that" around a quarter of rents may be renegotiated or suspended next year. "

Among the planned openings are the first of & Other Stories and Arket in China, a country where the group is suffering a boycott in recent weeks after announcing it would stop using cotton from Xinjiang, the region where the Uighur minority is allegedly been forcibly employed, among other human rights violations.

In this sense, H&M has issued a statement in which it ensures that its teams in the country are working “to manage the current challenges and find a way forward.” “Having been present there for more than thirty years, we have witnessed remarkable progress within the Chinese textile industry. Being at the forefront of innovation and technology, China will clearly continue to play an important role in further developing the entire industry”.

H&M states that it’s “dedicated to regaining the trust and confidence of our customers, colleagues, and business partners in China. By working together with stakeholders and partners, we believe we can take steps in our joint efforts to develop the fashion industry, as well as serve our customers and act in a respectful way”.