Outlook unclear as pandemic pushes H&M into deep loss

World’s second-biggest fashion retailer gave no third-quarter earnings guidance in April

H&M reported a pretax loss of €620 million. Photograph: Jason Alden/Bloomberg

H&M reported a pretax loss of €620 million. Photograph: Jason Alden/Bloomberg

 

H&M, the world’s second-biggest fashion retailer, swung into a steep loss in its March-May quarter and said its recovery outlook was uncertain, although trade had resumed faster than feared as pandemic lockdowns ease and stores reopen.

The biggest player Inditex, the owner of Zara, made its first loss in February-April. H&M’s loss was the first in decades and possibly the first ever, a spokesman said.

The Swedish group reported a pretax loss of 6.5 billion crowns (€620 million), slightly below market expectations, against a year-ago 5.9 billion crowns (€560 million) profit.

Its shares slipped 2 per cent, taking a year-to-date fall to 25 per cent.

H&M, which warned in April of the loss, gave no third-quarter earnings guidance.

“It’s incredibly uncertain how economies open up,” chief executive Helena Helmersson said. “With that, it’s tremendously difficult to say how results will be. What’s encouraging now is that the sales recovery is picking up in June.”

Ms Helmersson said it was particularly hard to predict developments in the United States, H&M’s biggest market after Germany.

Price cuts

June sales fell a better-than-expected 25 per cent, against a 50 per cent second-quarter dive. H&M, however, warned of more price cuts in the third quarter to shift unsold spring and summer wear, after markdowns squeezed second-quarter margins.

Ms Helmersson said some, less seasonal surplus garments could probably be sold during autumn. On orders to suppliers for autumn ranges, she said flexibility was essential.

“We will need to be careful not to buy too much a long time in advance. We need to wait as long as we can with purchases – to take the decisions as near the sales moment as possible,” she said.

H&M, which has been battling a years-long rise in inventories, slightly reduced stocks in the second quarter.

It should also make savings with a decision to open fewer new stores this year than previously planned, and permanently close more.

Of more than 5,000 stores worldwide, 7 per cent remained temporarily shut against around 80 per cent at the height of lockdowns.

– Reuters