H&M sales and profits up for Q1 but drop drastically since COVID-19 outbreak
H&M Group’s net sales increased by 8% to 54,948m Swedish krona in the first quarter ending 29 February 2020, while gross profit increased by 10% to 28,034m krona.
In local currencies, net sales increased by 5% compared with the same quarter the previous year, and online sales increased by 48% in SEK and 44% in local currencies.
However, as a result of the rapid global spread of the COVID-19 virus, sales have decreased significantly. As at 31 March, a total of 3,778 out of 5,065 stores were closed.
Net sales in March 2020 decreased by 46% in local currencies compared with March 2019. Since mid-March all of the stores have been closed in several of the group’s largest markets.
H&M CEO, Helena Helmersson, said: “The strong improvement in profit in the first quarter shows that customers appreciate our assortment and that our transformation work is having a good effect. The outbreak of coronavirus and the extraordinary public measures taken to reduce the spread of the virus have put people, communities and companies in an exceptional situation.
“The safety of our employees and customers is our highest priority and we are cooperating fully with the authorities. We are working very hard to manage this challenging situation in the best possible way, and in view of the dramatic decline in the market we have to make difficult decisions and take forceful action. However, I am convinced that as a company – once we are through this – we will continue to stand strong.”
In a statement released today, the group said that with each day it is having to keep stores closed, the situation is becoming increasingly demanding. It has therefore brought in a range of measures in purchasing, investments, rents and staffing. All parts of the business are included, and all costs are being reviewed.
Helmersson commented: “Regrettably, we have had to start implementing reduced working hours in the markets affected by the corona situation. Globally, this will affect tens of thousands of employees in all parts of the business, although it is not currently possible to specify an exact number. Local legislation has different definitions and conditions for temporary lay-offs or reduced working hours. We are also reviewing the need for any redundancies. Senior executives have taken a temporary 20% pay cut.”
The statement went on to say that in light of the current situation, the H&M board has decided to propose to the 2020 annual general meeting that the dividend is cancelled.
Helmersson added: “The current and extraordinary situation will have huge consequences for many companies, both in our sector and others. Dialogue between companies and governments is particularly important in a situation such as this, and the H&M group appreciates the various support measures that governments have introduced to ease the cost burden on companies in the markets concerned. In our view, however, further measures will be needed.
“The H&M Group wants to help in the fight against corona. We have temporarily switched parts of our suppliers’ production to making personal protective equipment for hospital staff. The H&M Foundation is also supporting the COVID-19 Solidarity Response Fund, which was started by WHO and other partners in order to contribute to understanding the spread of the virus, making protective equipment available and speeding up development of a vaccine.”
“The situation we find ourselves in cannot be compared with anything we have ever experienced before. It puts an incredible strain on people, our communities and, of course, also on us as a company. All this will also speed up the transformation already taking place in our sector. We believe that the major changes in consumer behaviour we are now seeing will further increase the digitalisation of society as well as the focus on sustainability – areas that remain very important to us.”
H&M Group’s online sales in March 2020 still increased by 17% in local currencies, and digital sales channels remain open in 47 of the group’s 51 online markets.
In China, demand has gradually started to recover, and more or less all of the group’s stores have now re-opened, with sales showing a gradual increase.
However, H&M has reportedly told its suppliers they will receive payment for orders fulfilled or started, but had paused all new orders.