Swedish clothing retailer H&M Group disclosed its first quarter financial report for fiscal year 2022. In the three months ending February 28, 2022, H&M Group’s sales increased by 18% to 49.1 billion Swedish kronor (approximately RMB 33.324 billion), with a gross profit margin of 49.3%. Operating profit and net profit were recorded at 458 million Swedish kronor and 217 million Swedish kronor respectively, which showed a significant rebound compared with the losses of 1.128 billion and 1.07 billion Swedish kronor in the same period last year. But overall profit levels were still lower than analysts expected. After the performance report was released, H&M Group’s share price fell 11%, the largest decline in two years, and the company’s market value evaporated by US$2.4 billion.
Affected by geopolitical conflicts, H&M Group closed 227 stores in Eastern Europe in March, 170 of which were opened in Russia. Russia is the sixth largest regional market for H&M Group, accounting for approximately 4% of global sales. Affected by this, H&M Group’s sales growth in March was only 6%. The Asia-Pacific and African markets are currently the H&M Group’s third-largest regional market worldwide, with revenue falling 9% during the quarter. The American market and Western European market grew significantly, recording sales growth of 26% and 35% respectively. Compared with competitors such as Zara parent company Inditex Group that have returned to a high-growth track, H&M Group has not yet fully emerged from the shadow of the epidemic. H&M Group’s revenue in fiscal year 2021 increased by 6% to 199 billion Swedish krona (approximately 19.2 billion euros). In comparison, Inditex Group’s revenue increased by 35.8% to 27.7 billion euros, with a gross profit margin of 57.1%.
H&M Group owns the eponymous brand H&M, low-priced brand Monki, and mid-to-high-end positioned brands such as COS, Arket and & Other Stories. Affected by the epidemic and slowdown in performance growth in recent years, H&M Group has made significant adjustments to offline sales channels globally.
The financial report shows that H&M Group only opened two new stores in Arket and H&M Home in the first quarter. As of February 28, the total number of stores of all its brands was 4,721, a decrease of 228 stores compared with the same period last year. H&M Group stated in its financial report that the number of new stores planned to open and close in 2022 will be 95 and 224 respectively.
In the future, South America will be the key market for H&M Group. In China, a new round of epidemic has led to the temporary closure of more than 40 stores under the H&M Group. The large H&M flagship store once located on Nanjing West Road in Shanghai has been closed after the lease expires in June 2021, and store sizes in other cities have also shrunk. Monki recently announced that it will withdraw from the Chinese market. The Tmall flagship store will stop selling products from April 1, and some offline stores are offering clearance discounts. In order to respond to market changes, H&M Group intends to increase its positioning of mid-to-high-end brands such as COS, & Other Stories and Arket in China. H&M Group is currently the second largest apparel retailer in the world. In the golden age of fast fashion, H&M Group created a new marketing model through co-branding with luxury brands such as Versace and Lanvin to enhance the voice of fast fashion brands. Even in the fast fashion winter of the past few years, H&M Group has still actively launched various projects to support independent designers, and its joint ventures with designers such as Simone Rocha have brought them a lot of attention. Image source: H&M Group H&M Group pointed out in its financial report that it will invest approximately 10 billion Swedish kronor in 2022 to promote transformation, and expects overall revenue to double in 2030. In response to the recent supply chain problems that have plagued the global apparel industry, H&M Group said it will implement a price increase strategy. Price increases have become the consensus in the fast fashion industry. According to a report by market research company Lectra, Zara and H&M increased prices by 23% and 13% respectively from August to December 2021.
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