H&M Q1 sales down 21% due to store closure but digital transformation continues "at pace"

Global fashion giant H&M reported Q1 sales down 21% to SEK 40,060m (£3,341m) in the three months ending 28 February as stores globally continued to be impacted by Covid-19 lockdowns, but the group said its digital transformation was continuing "at pace".

At most during the quarter, around 1,800 stores were temporarily closed, which is equivalent to around 36% percent of the group’s total number of stores. Online sales had continued to develop well during the period, it said.

The group’s profit after tax amounted to SEK -1,070m (-£89.25m) versus a profit of SEK 160.82m (£13.4m) in the corresponding period last year. Gross profit amounted to SEK 19,057m  (£1,589.6m). This corresponds to a gross margin of 47.6% versus 51% in the corresponding period last year.

However the group has seen an improvement in sales more recently with sales up by 55% in local currencies in the period 1 – 28 March 2021. This compares to the period in 2020 when the Covid-19 crisis hit Europe and the US, stores began to close and demand for fashion slumped.

H&M CEO Helena Helmersson said the group remained "humbled by the uncertainty that still exists due to the pandemic" but said it has seen a "fantastic response" to its new collections. She also highlighted the achievements the group had made with its digital transformation and its customer loyalty scheme which now has 120 million members in 26 markets.

Loyalty members can now get points for more conscious choices such as bringing in old clothes for H&M’s garment collecting, choosing climate-smart delivery options, bringing their own bag when shopping and choosing products made from more sustainable materials.

Helena Helmersson

Helmersson said: “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.

"The changes that we were already seeing in areas such as digitalisation and sustainability have been speeded up further by the pandemic. We have therefore increased the pace of change, and thanks to our significant investments in recent years we are able to meet customers’ changing behaviour and higher expectations with increasing speed."

Separately the group has today published its latest Sustainability Performance Report, which outlined achievements such as 64.5% of materials coming from recycled or more sustainable sources and the 100% use cotton that is organic, recycled or sourced in a more sustainable way.

On the digital transformation, Helmersson said: "Our digital initiatives are continuing, along with the development of our physical store network. We can see that customers both want to be able to see, feel and try on the garments in real life and to use digital channels to explore fashion, be inspired and shop. Looking ahead, we will strengthen the interaction between the channels further in order to offer customers the best experience with all of our brands.

"Our customer base is growing and one example of this is the rapid increase in the number of members of H&M’s customer loyalty programme. While we are humbled by the uncertainty that still exists due to the pandemic, it is fantastic to see the great interest that customers are showing in our collections. With a well-positioned customer offering we are continuing our transformation at full speed in order to create long-term sustainable and profitable growth for the H&M group.”