Store Closures Cost H&M Billions in Sales

With four-fifths of its global fleet still shuttered in the middle of April, H&M’s sales took a nosedive in the second quarter.

The fast-fashion retailer, which does business as Hennes & Mauritz AB, posted a 50% drop in revenues to 28.66 billion Swedish kronor, or $3.05 billion, for the three months ended May 31. Although it said the decline was less than it had initially expected, the company noted that sales were “severely affected” by the coronavirus pandemic, which forced the closures of majority of its stores starting mid-March.

So far this month, through June 13, revenues for the group have been down 30% in local currencies. H&M has been gradually reopening stores since the end of April in a number of market, with roughly 900 stores — or about 18% of its total 5,058 units around the world — still temporarily closed.

“The pace of the sales recovery varies at a large extent between markets,” the company observed.

On the other hand, e-commerce — which the retailer said was operating in 48 of its 51 online markets — increased by 32% in local currencies. The company is set to report its half-year financial results on June 26, when it expects to provide a more detailed assessment of the impact of the COVID-19 health crisis on its business.

In early April, H&M warned that it was expecting to post a quarterly loss for the first time in decades in the second three-month period of its fiscal year. Although consumers were still able to shop online, the group said it had seen “subdued demand” in its open markets.

As previously announced, H&M has taken several measures to reduce costs in the areas of buying, investments, rents and staffing. It furloughed a portion of its workforce in the United States as stores were shuttered due to government-mandated stay-at-home orders and lockdowns for nonessential businesses.

It also managed to secure a 980 million euro, or $1.1 billion, revolving credit facility to help cushion its business. Plus, the group has an undrawn facility worth 700 million euros, or $760 million, which it signed in 2017 and is set to mature in 2024.

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