H&M has paid the price for being a digital laggard

Following today’s release of H&M figures for Q4 and FY2019/20, Emily Salter, Retail Analyst at GlobalData, a leading data and analytics company, comments:

“The improvement in H&M’s global sales performance in Q3 (-18.7%) continued into Q4, with sales from 1 September to 21 October only falling 3% in local currencies. However, the second wave of COVID-19 in Europe and resulting lockdowns and restrictions on social events caused sales from 22 October to the end of November to fall 22%. Though H&M is still expected to outperform a number of players in the apparel market in 2020 such as Primark and Marks & Spencer, its online channel has not been able to offset store closures as much as other multichannel retailers. Key competitor Inditex today reported a net sales decline of -13.5% for its Q3 (August to October), in line with H&M’s performance, but online sales growth of 75% for the nine months ending 31 October will have outshined H&M (40% in Q2, 27% in Q3).

“Though H&M has not released sales performance by country, sales in two of H&M’s main markets of the UK and US will have continued to be hit especially hard by the impacts of the pandemic, with store closures in the UK for a month of Q4 followed by stricter restrictions on socialising, and localised restrictions in the US amid continued rising cases. Though demand for apparel will remain muted at the start of 2021, H&M’s value-focus will stand it in good stead as consumers cut back on non-essential spending due to the significant impacts of COVID-19 on global economies.

“As 2021 fast approaches with social distancing restrictions expected to remain in place for the majority of H1, store footfall will continue to be dampened, with apparel online penetration set to remain high in 2021 at between 30-40% in key markets including the UK and US. This makes it increasingly important for H&M to reduce the size of its excessive store estate. The retailer has paid the price for being late to the party online in FY2019/20, so it must rapidly align its online proposition with competitors to avoid a repeat of this next year.”

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