If you’re a frequent H&M shopper, chances are you’ve noticed the fast-fashion retailer’s price drops in the past few months — and it looks like there will be more to come.
The Sweden-based brand, which has had major markdowns both in stores and on its website, expects even more sales and clearances in the months ahead, owing to the prolonged winter season that has stalled its spring business. In a conference call to address the significant drop in first-quarter profit, the company warned investors that it will continue to offer price cuts to unload the clothes, shoes and accessories that it was unable to sell in the last season.
“Due to the weak sales in the autumn, we had too many garments going into Q1, which we’ve been working to clear throughout the quarter,” said Nils Vinge, head of investor relations and franchise. “In parallel, we have had an inflow of new garments; however, the unusually cold winter weather in February had a negative impact on the sales of these new garments.”
The mounting stack of inventory also suggests a struggle on the part of H&M to swiftly adapt to competition and changing consumer demands in the midst of a larger retail shift to digital avenues. This year, the company saw its biggest profit slump in years, noting that its online business hadn’t grown fast enough to compensate for the decline in store traffic.
Watch on FN
“The weak sales in the fourth quarter, partially caused by imbalances in the assortment for the H&M brand, resulted, as previously communicated, in the need for higher markdowns in the first quarter,” Vinge added. “Markdown costs increased by just about 2 percentage points as a share of sales.”
With Store Traffic Down, H&M Throws Resources Behind Digital