May 8, 2021


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H&M experiences in reshaping stores for post-pandemic life

5 min read

The flagship store Hennes & Mauritz in Stockholm’s main square is trying to break the mold. A woman who sews a patch on pants, evening dresses for hire, and a beauty salon are not standard rates for most fast fashion stores.

But services could be a taste of things to come as H&M, the world’s second-largest clothing retailer, determines what to do with its vast network of 5,000 stores in the wake of a pandemic that has pushed more buyers online. The Swedish chain’s ideas go so far as to examine whether its stores can play a role in online sales logistics.

For Helena Helmersson, appointed last year as the first CEO of H&M outside of the founding Persson family, it’s about strengthening relationships and engagement with customers.

“The network of physical stores we have is one of our strengths. These are the different roles that stores can play, the different formats. What kind of experiences are there in a store? Could they be part of an online supply chain? There is so much to explore. . . it’s almost exciting, ”she told the Financial Times.

Helmersson, 47, has had a difficult first year as CEO. At the height of the first wave of the Covid-19 pandemic, four-fifths of H & M’s physical stores were closed and a big online push could not make up for the blow. Sales fell by a fifth in H & M’s fiscal year through the end of November to 187 billion crowns ($ 22.6 billion), while pre-tax profits fell 88% to 1 , 2 billion crowns, interrupting a nascent recovery after years of decline.

Sales plunged in March and April, before rebounding strongly in summer, then making a new impression around Christmas.

But as the pandemic has forced H&M to faster decision-making and increased flexibility, and Helmersson predicts a pent-up wave of demand when Covid-19 is brought under control, the CEO is encouraged to say, “Overall , we will come out of the pandemic is stronger. “

Shipped from the H&M store in Minneapolis, Minnesota, USA, in April 2020

With four-fifths of H&M stores closed at the height of the first wave, pre-tax profits fell 88% © Ariana Lindquist / Bloomberg

Societe Generale analyst Anne Critchlow said relatively small increases in sales at H&M could lead to larger increases in profits. “The potential takeover is part of H & M’s appeal to investors at the moment: it is very strongly operationally oriented. H&M should be the fastest to recover, ”she added.

But she argued that Inditex, the Spanish owner of Zara who surpassed H&M as the world’s largest fashion retailer in terms of sales ten years ago, was a “better company”, and that the Swedish group could be a “bit slower” to return to its pre-pandemic profit levels as some customers shun its stores.

H&M shares have fallen steadily from 2015 to 2018, before slipping largely since then, although they have climbed 50% from their Covid-19 low in March of last year.

Helmersson, an H&M lifer who joined the retailer in 1997 as an economist, said she began to see “the light at the end of the tunnel” after a “very demanding” period. “I have very high expectations of myself. Adding a crisis on top of that, it was a really tough year.

Now, however, his attention shifts to a crucial question for H&M: “Where do we need to go faster?”

Line graph of total sales growth (%) showing that H&M sales have kept pace with Inditex

Despite being on trend, critics said H&M had grown sluggish, edged out by more nimble Inditex and online retailers such as Zalando and Asos. Inditex could purchase new clothes in Zara stores within weeks from nearby manufacturing sites in Europe, while H&M, with more supply in Asia, took longer. The opening of new stores has given the Swedish group an easy route to sales growth, but has not helped its profit margins, which have been falling steadily for ten years.

Helmersson said H&M made “really, really quick decisions” at the start of the pandemic about how it bought clothes, worked with its supply chain and switched to selling more online. She highlighted how technology allowed designers, suppliers and the production office to work together at the same time to produce new clothes, rather than waiting for one to send one piece of clothing to another.

H&M rental service in a store in Stockholm, Sweden

It is ‘difficult to gauge the scale’ of trials such as clothing rentals, H&M chief said © DAVID THUNANDER

“It sounds really basic, but if you do this in a lot of processes you can be a lot faster. You also have data to give you more customer insight, which means you can act much faster, ”she said, adding that accessories can now go from design to store in a matter of weeks. , t-shirts in six weeks and pants in eight.

H&M is also trying to increase its speed on sustainability, setting the goal of using 30% recycled material by 2025. Critchlow said the group is leading the industry in its attempts to become circular, although many people worry about the speed. fashion groups encourage excessive consumption. Strong investor demand this month led H&M to cut the interest rate on its first sustainability bond, which was 7.6 times oversubscribed

Rebased stock price line chart showing that Inditex has outperformed its rival over the past decade

Helmersson, former head of sustainability at H&M, said the most difficult task for the retailer was to decouple its growth from its use of natural resources. She added that the trials of repairing and renting clothes as well as selling second-hand clothes through the Sellpy website, of which H&M is the majority owner, were important but difficult to measure their size. “We are so big that we can influence customer behavior to some extent. But we’ll also see how ready they are, ”she added.

Critchlow said H&M deserved “all the credit” for the trials, but that they were unlikely to lead to higher profit margins. She added that the crucial questions were how quickly H&M returned to pre-pandemic sales and profit levels and if it could go further. “It forces H&M to manage store costs,” she said, adding that renegotiating leases during the pandemic had helped little.

There is also debate about how the increase in online sales – which is expected to rise from 28% of H&M’s total last year to around 43% in 2025, according to Critchlow – helps given that they lead to additional costs such as delivery and returns. as well as in logistics.

Helmersson is unfazed, saying H&M will offer several ways for customers to interact with the retailer through various store formats offering different services, online and its own club. “The customer journey is constantly evolving,” she says. “We will follow and influence. Before, it was about transactions, now it is about relationships with customers. “

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