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The global fashion business journal

Aug 12, 20205:22am

H&M swings to loss in second quarter, sales slump 50%

The Swedish giant reported a pre-tax loss of 6.5 billion crowns ($685 million), against a year-ago 5.9 billion profit. The group is going to increase the pace of closures with around 170 gross closures this year.

Jun 26, 2020 — 9:00am
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 H&M swings to loss in second quarter, sales slump 50%

 

 

 

H&M gets also hit by the coronavirus pandemic. In the march-may period, when stores were shut across the globe to contain the spread of the virus, the second-biggest fashion retailers swing into a deep lost and shrunk its sales by 50%.

 

The company reported a pre-tax loss of 6.5 billion crowns ($685 million), against a year-ago 5.9 billion profit. Sales fell to 28.7 billion crowns ($3 billion), down from 57.5 billion in the second quarter of 2019. Up to 80% of its stores were closed in mid-April and most of the markets were closed throughout the period. Online sales increased by 36 percent in SEK during the quarter.

 

The pace of recovery since reopening has varied “greatly,” CEO Helena Helmersson said, but has been “better than expected”. In the period 1–24 June 2020 sales decreased by 25 percent in local currencies compared with the same period in 2019.

 

Gross margin excluding IFRS 16 shrank to 46.3 per cent, down from 55.4 percent a year ago. The decrease was mainly due to the costs of goods sold, that could not be adjusted at the same pace as the rapid evolvement of the Covid-19 situation. The cost of markdowns in relation to sales increased by around 3 percentage points.

 

 

 

 

“The H&M group’s liquidity remains good,” the company emphasizes. As at 31 May 2020, cash and cash equivalents amounted to 12.7 billion crowns ($1.3 billion). Cash and cash equivalents plus undrawn credit facilities totalled 31.2 billion crowns ($3.3 billion).

 

Following similar announcements of rivals like Inditex, H&M said it is increasing the pace of its store optimization plan for full-year 2020. Around 170 closures and around 130 openings are planned, resulting in a net decrease in the number of stores of around 40.

The company expects markdowns in relation to sales to increase again in the third quarter since there is an oversupply of spring products.

 

“It is clear that the rapid changes in customer behaviour caused by the pandemic will further speed up the digitalisation of fashion retail. To meet this, we are continuing to adapt the organisation and improve our ways of working, which will make us more flexible, fast and efficient,” Helmersson said.

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