The Swedish clothing maker is having serious trouble selling its merchandise. See how H&M intends to solve its financial problems!
The popular clothing company H&M recorded a 62 percent drop in sales compared with the previous year. Such statistics indicate that the Swedish producer posted its lowest revenue in more than a decade.
Despite clearance sales at H&M, the amount of unsold goods rose by as much as 7%. As a result, the Swedish producer said in February that it would have to close 170 stores worldwide, the most in 20 years.
Why is H&M struggling with sales?
H&M is one of the most popular retail chains — in Poland too — but that does not change the fact that people are increasingly shopping online and visiting physical stores less often. Free shipping and returns, which spare customers a trip to a clothing outlet, are probably the biggest factor.
The lower the foot traffic in a store, the greater the amount of unsold merchandise, which must be cleared out as quickly as possible as a new collection arrives to make room in the warehouse. That forces longer discount periods, which reduces the profitability of the entire business.
“Weak sales caused by an imbalance in the brand's assortment forced the company to introduce large price cuts on products. The high level of markdowns combined with an extremely cold winter had a negative impact on spring clothing sales.” — says H&M CEO Karl-Johan Persson.
How to increase profits?
H&M already has a specific action plan to prevent further sales declines. The company intends to focus on digitalizing its business. Under its plans, by the end of 2020 H&M wants to open online stores in all markets where it operates. In addition, the Swedish giant will enter into a partnership with the Chinese platform Tmall, which is expected to help improve the brand's results. In 2018, H&M plans to enter the markets of Uruguay and Ukraine.
“2018 is a transitional year for the H&M group; we are accelerating our transformation so that we can take advantage of the opportunities offered by rapid digitalization.” — says CEO Karl-Johan Persson.
Summary
H&M is grappling with a record 62% sales drop and a growing number of unsold goods, which forced it to close 170 stores. The company is betting on digitalization and plans to launch online stores in all markets by the end of 2020. CEO Karl-Johan Persson announces an acceleration of the transformation, and cooperation with the Chinese platform Tmall is to be a key element in rebuilding results. In 2018, the brand will also enter the markets of Uruguay and Ukraine.
