H&M is cutting its cloth
• Swedish fashion retailer plans to close 250 stores as it battles Covid-19 slump
H&M CEO Helena Helmersson is getting tough in her first year running the Swedish fashion retailer. She is making H&M’s biggest retrenchment as the pandemic worsens its record inventory build-up, while the retailer said on Thursday it plans to permanently shut 250 stores on a net basis in 2021 after eliminating 50 this year.
Hennes & Mauritz (H&M) CEO Helena Helmersson is getting tough in her first year running the Swedish fashion retailer, announcing plans to reduce the store count by 5% next year.
The CEO is making H&M s
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biggest retrenchment as the pandemic worsens its record inventory build-up. The retailer said on Thursday it plans to permanently shut 250 stores on a net basis in 2021 after eliminating 50 this year. The stock rose as much as 8.3%. Helmersson s first year at the
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helm of the company has been more challenging than she bargained for as Covid-19 has plunged the industry into its worst business conditions in decades. Inventory remains a headache, increasing to more than 21% of 12-month revenue. That is more than double the level of Zara owner Inditex.
Job cuts are looming throughout the retail industry as chains find it is easier to sell online than in person. Marks & Spencer said in August it is cutting about 7,000 jobs. Any reductions at H&Mwould probably affect a bigger proportion of women than men. About threequarters of H&M s 180,000
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employees are female.
Third-quarter pretax profit came in at 2.3-billion krona, higher than the 2-billion-krona estimate that H&M gave last month. Sales have been recuperating, with revenue dropping 5% in September, the first month of H&M s fourth quarter. Third
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quarter sales had fallen 16%.
The recovery is going better
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and faster than we expected,” Helmersson said, attributing the performance to well-received collections and strict cost control. The worst is behind us.”
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She declined to estimate how many jobs may be cut. H&M plans to close shops in mature markets, such as Europe and the US, whereas the retailer will open more stores in countries with more growth potential such as Russia, India and Japan.
The sudden appointment of the new CEO in January signalled a step back by the family shareholders who dominate H&M. They replaced Karl-Johan Persson, grandson of the company s founder, after he failed to
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reduce the amount of unsold garments over the past four years. He is now H&M chair. Helmersson s 23 years at
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H&M began in 1997 in purchasing, and she has worked in Bangladesh and Hong Kong for the retailer.
A year before the recent promotion, she became COO.
The new CEO is starting to prune a retailer that the Persson family expanded every year for over the past two decades, increasing the store count from about 600 to 5,000.
After years of overstoring,
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we welcome this change and are encouraged by the magnitude of cuts,” wrote Aneesha Sherman, an analyst at Sanford C Bernstein.
H&M is also trying to lower rents of existing stores. The company s lease agreements are
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scheduled so that it can renegotiate or exit one-quarter of them in any given year. That will help reduce the cost of closures, Sherman said.