H&M’s business is rebounding more quickly than anticipated — a hopeful sign for the battered fast-fashion industry.
The Sweden-based retailer announced today that its profits before tax for the months of June through August came in at around 2 billion Swedish crowns, or about $229 million at current exchange. Sales declined 19% — or 16% in local currencies — to 50.9 million crowns, or roughly $5.8 million. Nevertheless, both metrics show an improvement that’s leaps and bounds from the massive declines H&M saw in March and April when the pandemic was ramping up in the United States.
“As a result of appreciated collections together with rapid and decisive actions, the H&M group’s recovery is better than expected,” it wrote in a statement. “More full-price sales combined with strong cost control enabled the company to already turn to profit in the third quarter.”
Over the past several months, analysts have warned that sales and foot traffic at fashion and footwear chains would take significant time to bounce back to pre-pandemic levels. A recent surge in COVID-19 infections in a number of countries, including certain parts of the U.S., have also threatened this recovery.
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According to H&M, sales development during the three-month period reflected the impact of the coronavirus pandemic: At the beginning of the quarter, approximately 900 outposts in its more than 5,000 brick-and-mortar fleet were temporarily shuttered due to state and local government restrictions on nonessential businesses. By the end of August, just above 200 locations remained closed.
Comparatively, H&M swung to a steep loss in the second quarter: For the three months ended May 31, the retailer reported a pretax loss of 6.5 billion crowns, or $696 million, and a 50% decline in sales to 28.66 billion crowns, or $3.07 billion.
Although consumers were still able to shop online, the group at the time said in early April that it had seen “subdued demand” in its open markets. To preserve cash, H&M sought to reduce costs in the areas of buying, investments, rents and staffing — including furloughing a portion of its workforce in the United States. It also ramped up its focus on digital sales channels; the chain’s online sales increased by 32% in local currencies during Q2 2020.
“During the pandemic, it became clear how important it is that the digital and physical channels interact to meet customers’ needs,” CEO Helena Helmersson said in late June, when the company also announced intentions to increase the pace of store closures and reduce the number of openings in 2020. Around 170 outposts are expected to shut down — 40 more than it had originally planned — and about 130 openings are anticipated.
H&M’s final results for the third quarter and nine-month period will be released on Oct. 1.