H&M records a 50% decline in quarterly sales due to Coronavirus restrictions

Written by: Wajeeh Khan
June 15, 2020
  • H&M records a 50% decline in quarterly sales due to Coronavirus restrictions.
  • The fashion retailer says its online sales surged 36% in the second quarter.
  • The Swiss company still has roughly 18% of its retail stores closed due to COVID-19.

H&M (ETR: HMSB) said on Monday that its sales in the second quarter saw a sharp decline as governments resorted to countrywide lockdowns to minimise the fast spread of the novel flu-like virus that weighed on demand. The fashion company’s Q2 sales, however, still came in slightly stronger than expected.

Shares of the company were reported about 2% down in premarket trading on Monday. At £12 per share, H&M is currently more than 25% down year to date in the stock market after recovering from a low of £9 per share in March. Learn more about value investing strategy.

H&M posts a 36% increase in its quarterly online sales

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At £2.4 billion, the world’s biggest fashion retailer posted a 50% decline in its sales in the quarter that ended on 31st May. According to Refinitiv, analysts had forecast the company to print a lower £2.35 billion worth of sales in the recent quarter.

H&M’s largest global competitor, Inditex, that owns prominent fashion brands like Zara and Bershka also reported a 44% decline in its quarterly sales last week.

H&M also recorded a massive 36% increase in its online sales in Q2. The retailer was pushed into temporarily shutting down roughly 80% of its stores in recent months due to COVID-19. The company announced to have started reopening its retail stores for the public in late April. In June, H&M added, its sales (local-currency) were about 30% down in the first thirteen days.

The Stockholm-headquartered company is scheduled to release its complete earnings report for the second quarter on 26th June. H&M currently has a total of 5,058 stores, out of which, 18% are still closed due to the ongoing health crisis. The retailer recently had to close around 95 of its U.S. stores due to the ongoing protests.

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H&M stores struggled with digitalisation in recent years

Several of H&M’s retail stores have struggled in recent years with digitalisation and an ever-rising competition, resulting in an increase in inventories. Before the outbreak, the fashion retailer was confident that it will be able to address this surge in 2020.

H&M expressed confidence that it remained committed to strictly controlling inventory through the ongoing crisis. Owing to the delayed arrival of products from Bangladesh and China, however, analysts still forecast an increase in its inventory in May.

At the time of writing, the Swedish multinational clothing retail company has a market cap of £17.65 billion and a price to earnings ratio of 16.13.