H&M Suffers From Online Disruption

Shares of the world’s second-largest fashion chain, H&M, have hit its lowest in eight years as the retailer reports plummeting sales at the conclusion of a despondent year.

In the three months to the end of November 2017, H&M reported a 4 percent drop in sales, and on Friday its shares traded 15 percent lower than its lowest level from back in May 2009.

Like many high-streets fashion brands H&M is having a difficult year, struggling to cope with the shift to online shopping. The retail giant blamed online shopping as well as “imbalances in parts of the H&M brand’s assortment composition”.

The company says as a result it would focus more on integrating its online and brick and mortar stores, and re-strategise its physical store footprint by closing more stores and opening fewer.

“In order to respond even quicker to customers’ fast-changing behaviour the company’s ongoing transformation journey is being accelerated. Among other things, this includes continued integration of the physical and digital stores, and intensifying the optimisation of the H&M brand’s store portfolio – leading to more store closures and fewer openings,” it said in a statement on Friday.

H&M was one of the first retailers to sell online, but due to slowing its digital stride, it had been quickly overtaken by both pureplays, such as ASOS, and high-street fashion labels such as Zara, Gap and Uniqlo. H&M also had a plan to aggressively grow its physical stores, which clearly now has been reconsidered.

In a separate note, H&M also announced on Friday that it would start selling its merchandise on China’s Alibaba-owned Tmall e-commerce platform by the second quarter next year. It currently sells its Monki brand on the site, however it’s in negotiations at the moment about selling all of its eight brands on the world’s largest e-commerce platform.

“We are very happy to be able to make H&M even more accessible in mainland China. Tmall is an important complement to our existing physical and digital stores. We see great potential for substantial future growth and Tmall will be an important part of this,” says Karl-Johan Persson, CEO of the H&M group.

Controlled by the Pearson family, which still provides the company with a CEO and a chairman, H&M has been under pressure from its minority shareholders, and in February 2018 it will hold its first-ever investor day.