The fashion giant Hennes & Mauritz (H&M) slipped into a red zone last quarter due to COVID-related forced closures of its stores.
H&M announced on Wednesday that the aggressive restrictions brought on by the second wave of the pandemic lead to financial repercussions and losses for the company. The company was forced to temporarily close numerous stores due to the pandemic.
“The H&M group’s net sales amounted to SEK 40,060 m (54,948) in the first quarter. In local currencies, net sales decreased by 21 percent. The second wave of the pandemic resulted in extensive restrictions. At the most, around 1,800 stores were temporarily closed, i.e., around 36 percent of the group’s total number of stores. Online sales continued to develop very well,” said the report.
The fast-fashion chain reported a loss of 1.07 billion Swedish kronor (around €105 million) during the important winter season (December to February). In the corresponding quarter, a year earlier, the group had made a profit of 1.9 billion kronor. Store closures caused H&M to start the fiscal year with a massive drop in sales that they announced two weeks ago.
While online sales continued to do well during the pandemic, they did not compensate for the lack of store sales. Performance in March 2021 was definitely better than the same period last year, which suffered a particularly hard hit due to the first global lockdown.
The group’s CEO, Helena Helmersson, finished the quarterly report on a positive note; however, “It is now a year since the full force of the pandemic hit. I am deeply impressed by and proud of all our colleagues’ fantastic commitment and customer focus during a very challenging time. Although it is still largely a matter of managing the negative effects of recurring store closures, it is clear that customers appreciate our offering. When markets have been allowed to open, store sales have picked up while at the same time online sales have continued to develop very well.”
H&M responds to boycott problems in China
H&M has recently been accused of committing extreme human rights violations against the Uighur Muslim minority in the Xinjiang autonomous region, which China denies.
The company responded that it is working with its team in China to overcome the current challenges and find a way forward, “China is a very important market for us, and our long-term commitment to the country remains strong,” the group said on Wednesday.
In doing so, the company emphasized that it has been active in the country for more than 30 years and has observed remarkable progress within the Chinese textile industry. H&M said that it is striving to regain the trust of consumers, colleagues, and business partners in China.
The company had already announced last year that it would no longer source cotton from China’s Xinjiang region. Previously, there had been reports that the Muslim minority of the Uighurs were forced into slave-like labor there.
After the EU imposed sanctions on China for human rights violations for the first time in over 30 years at the beginning of last week, H&M, like other fashion and sports brands in China, came under massive criticism.
There are also widely shared posts to boycott H&M circulating on social networks. H&M products could no longer be found on several major online shopping platforms in China. A number of Chinese celebrities publicly terminated their cooperation with H&M and several other retail giants.
According to the report, China was H&M’s third-largest market in terms of net sales before the boycott, behind the U.S. and Germany.
On the Stockholm stock exchange, H&M shares recently fell by more than two percent. The stock started to slowly retreat in mid-March. Some analysts, however, reacted positively: in the first quarter, the fashion retailer showed a solid performance despite major burdens due to the pandemic-related restrictions.