Swedish clothing brand H&M just released its quarterly report, and it isn’t looking good: the company reported a shocking drop in profits in the second quarter.
The Covid-19 crisis forced H&M to close about 80% of its shops around the world, especially in profitable markets such as Europe and Asia. At the height of the crisis, H&M stated that its net loss fell to around 5 billion SEK ($535 million USD).
“When the majority of the stores were temporarily closed in the second quarter, we focused on redirecting product flow to our digital channels,” recently-appointed CEO Helena Helmersson said in the quarterly report.
The strategy worked: From February to May 2020, overall sales fell 50 percent compared with a year earlier to 28.7 billion kronor. However, online sales rose 32 percent during that same time period.
Although H&M’s online store has been its saving grace, the crisis isn’t over: now the company has to rearrange their entire business plan. H&M was planning to close 130 stores and open 165 more, but this year they expect to close 170 stores and open less than 130.
At the moment, around 350 stores are closed, which makes up 7% of H&M’s global total.
“The second quarter will naturally be very negatively impacted by the corona situation and will, therefore, be loss-making,” the company noted.
However, CEO Helmersson ended on a positive note: “The fact that we have acted quickly to counter the negative effects of Covid-19 and that we are speeding up the transformation of the H&M Group makes me convinced that we will come out of the current crisis stronger.”