The world’s second-largest clothing retailer, H&M, will be closing 250 stores in 2021 as the pandemic forces consumers to shop online.
In a press statement Thursday, the company reported it plans to decrease stores to around 5 percent as around a quarter of the company’s 5,000 retail stores have contractual tight to renegotiate or exit their leases every year.
The Swedish clothing retail company said rapid changes in customer behavior have been accelerated by COVID-19 with some customers shifting to online shopping due to the pandemic.
Instead of shopping in actual brick and mortar stores, many customers have resorted to shopping online due to fear of contracting the coronavirus while many of customers were prevented from visiting actual stores due to enforced lockdowns in some cities where H&M stores are located.
To address the problem, H&M has stepped up efforts with digital investments, optimization of the store portfolio, and increasingly integrated channels to address lowered sales.
The company also reported that sales in September 2020 decreased by 5 percent in local currencies compared with the same period last year.
The company also reported as high as 80 percent of temporary store closures during the second quarter of the year due to lockdowns and government restrictions.
As of last month, a total of 166 stores, representing 3 percent of the total number of stores worldwide are still closed. A large number of H&M stores still have local restrictions and limited opening hours.
The H&M group’s net sales amounted to 134 billion Swedish kronor ($15 billion) in the first nine months of the financial year from December 2019 to August 2020.
The company’s pre-tax profits also fell to 2.37 billion Swedish kronor ($254 million) from December 2019 to August 2020.
H&M sales performance improving but remains affected by the pandemic
Third-quarter performance remains negative for the company despite some stores opening as net sales dropped to $5.7 billion or a decrease of 16 percent.
At the beginning of the third quarter, approximately 900 of the group’s more than 5,000 stores were temporarily closed. At the end of the quarter, just over 200 stores were temporarily closed.
The Stockholm-based company statement also said that as regards the Covid-19 situation, they have made ‘rapid and decisive action’ in the business to include product purchasing, investments, rents, staffing, and financing.
“Through much-appreciated collections and rapid, decisive actions, we returned to profit already in the third quarter. Our employees have made amazing efforts to achieve our fast recovery. Although the challenges are far from over, we believe that the worst is behind us and we are well placed to come out of the crisis stronger,” Helena Helmersson, H&M chief executive officer said.
Helmersson also said demand for good value, sustainable products is expected to grow in the wake of the pandemic as the company is now accelerating transformation work to continue adding value to customers.
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