H&M must focus on digital in its mature markets to safeguard sales, says GlobalData

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Following today’s release of H&M figures for FY2019/20; Emily Salter, retail analyst at GlobalData, a leading data and analytics company, comments: “H&M’s revenue and operating profit have been significantly affected by the pandemic as its online proposition proved unable to make up for lost store sales, with a maximum of 80% of stores temporarily closed in its worst quarter, Q2, though Q4 sales impressively returned to 2019 levels prior to the second wave of the virus. AS H&M continues to play catch-up with its digital proposition, online sales accounted for 28% of the group’s total sales in FY2019/20. Though this is a significant improvement versus the last financial year, H&M faces increasing competition in Europe and the US from players such as ASOS and Zara as they hone their digital offers.

“Demand has remained muted at the start of H&M’s FY2020/21, with sales falling 23% in local currencies from 1 December 2020 to 27 January 2021 as up to 36% of stores were temporarily closed again, with limited interest being able to be driven by loungewear. Despite this, the group stands to benefit from core brand H&M’s value proposition in 2021 and beyond as consumers reel from the financial impacts of COVID-19. The brand is not resting on its value laurels though, as its latest designer collection with Simone Rocha will provide it with a unique offer and boost its fashion credentials.

“The group’s previous strategic plan of focusing on online, increasing the efficiency of its supply chain and the fine-tuning of its physical network was the right strategy, but if it had been put in place earlier it could have better mitigated the impacts of COVID-19. Optimising its store estate will be key in FY2020/21, with a net 250 stores expected to close versus only 58 net closures in FY2019/20. The focus needs to be on elevating its remaining stores, as well as more closely associating them with one of H&M’s other priorities: sustainability. Though it sometimes comes under fire for greenwashing, H&M has benefitted from its strong stance on sustainability and ethics and will continue to do so. Its stores could be used to create sustainability hubs to boost its reputation and footfall, bringing together its innovations such as resale (COS Resell launched in September 2020); Looop, its garment recycling system; and clothing repairs.”