H&M threatens to walk away from leases without post-coronavirus sales revival

H&M has written to landlords asking them to agree to terms that could see the retailer break a store lease with one month’s notice if trading conditions did not return to pre-outbreak levels.

In a separate letter, seen by Retail Week, the fashion retailer also pushed landlords across its 300-plus store estate to agree to a variety of rent-free periods on current base rents, a reduction in service charges to reflect drops in footfall and a change to paying rents monthly in arrears. On stores operating on turnover lease models, H&M is requesting that on account rent be removed.

The letter said: “In all of the above scenarios, H&M is to have the right to close stores immediately without being in breach of the keep open clause” and “personal concessions are to remain and fixed rents will not be payable.

“We look forward to coming to an agreement to ensure the short-term impact of Covid-19 is mitigated as much as possible to ensure longer-term success for both parties.”

One property source, who asked not to be named, said landlords have reacted badly to the letter as H&M has a history of negotiating aggressively in the past.

In a statement, an H&M spokeswoman said: “This is an extreme situation and H&M group is working extensively to manage the Covid-19 situation, the highest priority being the safety of employees and customers. All activities in the company are now being carefully evaluated – including costs and risk perspective – to be able to mitigate the negative effects associated with the virus as far as possible.

“We cannot go into specific details, but our intention is to handle this extraordinary period in the best way possible and work with our long-term partners. We see it as a joint responsibility between us and our partners to ensure a financially stable and sustainable future for our businesses.”