H&M profits tumble as Covid-19 batters sales

The fashion giant said profit after extraordinary items tumbled 88.2% to SEK 2bn (£174.4m) during the year to November 30, 2020. Gross profit fell 23.6% to SEK 93.5bn (£8.15bn).

Net sales dropped 18% on a local currency basis to SEK 187bn (£16.3bn) during the year.

H&M said sales progress was “significantly negatively affected by the pandemic, particularly in the second quarter when stores were temporarily closed in most markets”.

At the height of the health emergency, approximately 80% of H&M’s stores across the globe were closed.  

H&M said it “rapidly implemented” a series of measures during the year to mitigate the impact of the pandemic in areas such as product purchasing, staffing, financing and its rent obligations.

It added that “greater emphasis” on its digital channels “partly compensated” for the slump in-store sales.

H&M said it registered a “strong recovery” at the start of its fourth quarter, but admitted this was “significantly slowed” when the second wave of the coronavirus sparked fresh restrictions and lockdowns across its global markets.

On a local currency basis, net sales dropped 10% to SEK 52.55bn (£4.6bn) in the three months to November 30.

During the crucial Christmas trading period, which fell after H&M’s year-end, sales fell further as the temporary closure of more than 1,800 stores dented the group’s top line.

In the period from December 1, 2020, to January 27, 2021, net sales slumped 23% on a local currency basis compared with the same period a year ago.

Despite the negative impact of the pandemic, H&M insisted its financial position “remains strong” and said there were “good prospects” it would pay a dividend to shareholders in the autumn.

H&M chief executive Helena Helmersson said: “With strong, profitable online growth and good cost control we succeeded in ending the year in profit and with a strong financial position.

“Taking decisive measures quickly, combined with an attractive customer offering, led to a better recovery than expected up until the second wave of the pandemic struck. Our measures to mitigate the negative effects of ongoing restrictions and closures are continuing.

“Although the situation at the time of writing is highly challenging, the H&M group stands strong.”

Looking beyond the pandemic, Helmersson added: “Our key focus remains on developing strong, unique brands in order to always offer the best combination of fashion, quality, price and sustainability.

“The percentage of recycled and sustainable materials in the collections is consistently increasing and our brands are offering an ever-growing range of services for a more sustainable lifestyle.

“Together with our transformation initiatives, this will help increase our resilience and adaptability and will contribute to sustainable and profitable growth for the H&M group.”