Coronavirus pushes H&M into the red in first half

Coronavirus pushes H&M into the red in first half

H&M swung into a deeper loss than what analysts expected in its March-May quarter due to the coronavirus pandemic, although sales are recovering despite an uncertain outlook.

The Swedish retail giant had already issued its second quarter sales figures earlier this month, but yesterday it explained what those reduced sales meant for the bottom line.

While it said trading and sales and resumed faster than anticipated, they’re still significantly down during June and it expects discounts to be ongoing in the third quarter.

Net sales for the entire half to May 31 fell 23 per cent to SEK 83.61 billion (£7.07 billion) and the loss after financial items was SEK 3.97 billion (£340 million) while post-tax loss was SEK 3.06 billion (£260 million).

For its second quarter, H&M said sales came in at SEK 28.66 billion (£2.42 billion), a dramatic 50 per cent drop from the SEK 57.47 billion it had seen in the same 2019 period as coronavirus lockdown measures around the world saw 80 per cent stores temporarily closed by mid-April.

However, quarterly online rose by 36 per cent year-on-year to partly make up for the drop caused by the pandemic.

Quarterly gross profit was SEK 13.28 billion (£1.12 billion), with a gross margin of 46.3 per cent, down from 55.4 per cent.

It meant the loss after financial items was SEK 6.48 billion (£550 million) and after-tax loss was SEK 4.99 billion (£420 million)

Despite this, H&M said its liquidity was still in good health.

On May 31, cash and cash equivalents amounted to SEK 12.7 billion (£1.07 billion) and with undrawn credit facilities added in, cash available totalled SEK 31.24 billion (£2.64 billion).

For more recent sales, H&M said that in the current quarter up to June 24, its sales improved with a 25 per cent drop in local currencies year-on-year, compared to the 50 per cent plunge it recorded in the second quarter.

Its stores have also been opening steadily as lockdown measures ease around the world, with only seven per cent of its store estate – around 350 locations – are still closed, and 48 of its 51 online markets are open.

“As the pandemic has speeded up the digital shift in the industry, the company’s transformation work relating to digitalisation, the supply chain and the organisation is being accelerated,” H&M said in its trading update.

Group chief executive Helena Helmersson said: “Before the pandemic hit, we performed strongly – a result of many years of long-term investments to meet the digital shift in the industry.

“This, combined with the fact that we have acted quickly to counter the negative effects of Covid-19 and that we are speeding up the transformation of the H&M Group, makes me convinced that we will come out of the current crisis stronger.

“During the pandemic it became clear how important it is that the digital and physical channels interact to meet customers’ needs.

“When the majority of the stores were temporarily closed, we focused on redirecting product flow to our digital channels, which remained open at all times in nearly all our online markets. The positive development of online sales has continued since we began reopening our stores.”

Helmersson also highlighted that H&M’s pace of recovery varied between markets, partly because local restrictions differ, although it has so far been better than expected.

“Since there is an oversupply of spring products throughout the industry, and the market remains weakened, we expect markdowns in relation to sales to increase again in the third quarter,” she said.

“We are continuing to adjust costs to mitigate the negative impact of the Covid-19 situation.”

Read the full article here – retailgazette.co.uk