H&M gradually recovering from COVID-19 despite online lagging behind

Following today’s release of H&M Q3 figures for 2019/20, Sofie Willmott, Content Head of Apparel at GlobalData, a leading data and analytics company, comments:

“Despite an improving trend in its global sales performance following a terrible Q2 (March-May) when group sales declined 50%, H&M’s online channel has not picked up the slack of store closures to the extent that it has at many of its multichannel competitors. H&M’s online performance in Q3 was similar to last year’s growth despite around 900 stores being shut at the beginning of the quarter (down to just over 200 by the end) and it has not benefitted as significantly from the same dramatic level of channel shift that other clothing specialists have. Global fashion giant, Inditex’s online sales rose 74% for the six months ending 31 July 2020 whereas H&M’s online sales rose 40% in Q2 and just 27% in Q3 (which together cover a similar period). Although H&M is prioritising digital investment, it must act quickly to improve its online proposition globally, in response to rapidly changing shopping habits.

“Two of H&M’s biggest markets have been hit particularly hard by the pandemic with US and UK Q3 sales declining 34% and 20% respectively in local currencies. The retailer has been and will continue to be hindered by its excessive store estate comprised of over 5,000 branches globally and although it plans to trim this down, it will have to consider accelerating closures. With 130 branches planned to open this year and 180 closing, 50 net store closures accounts for just 1% of its estate. It plans to close 250 stores next year but this is still just 6% of its locations and considering that apparel online penetration is set to remain high, at between 30-40% in key markets including the UK and US, H&M should make more significant changes.

“H&M’s value-focus and sustainable credentials will stand it in good stead as global economies reel from the effects of COVID-19 and shoppers reduce spending on non-essential items as a result. Sales in September fell just 5% demonstrating the relevance of its product offer as shoppers start to feel more confident returning to stores. Both its value appeal and environmentally-friendly reputation, boosted by new initiatives such as the launch of the COS resale platform, sets H&M apart from its competitors but it must enhance its online proposition given the importance of digital channels, to succeed in a very tough market.”

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