Annual profits

Coronavirus “H&M warns of sales after COVID-19 decimates annual profits

WATCH: H&M warns of sales after fall in annual profits

Swedish retailer Hennes and Mauritz (H&M) has warned about its first quarter sales after the coronavirus pandemic decimated its annual profits.

Profits at the world’s second-largest fashion retailer fell 88.2% to £ 179million ($ 245million) in the year to November 30, 2020, and gross profit fell by 23.6% to 8.15 billion pounds sterling.

H&M (HM-B.ST) also warned that sales fell by almost a third in December and most of January due to coronavirus lockdowns.

Net sales over the same period fell 18% to £ 16.3 billion, as sales development was ‘significantly and negatively’ affected by COVID-19, particularly in the second quarter when stores moved been temporarily closed due to closures.

About 80% of the group’s stores were closed, at the height of the confinements. Currently, around 36% of its stores are closed.

About 80% of the group’s stores were closed, at the height of the confinements. Photo: Vyacheslav Prokofyev TASS via Getty

Sales at the cheap chic seller, which has stores in 74 countries, fell 23% in local currency. It had previously reported a 10% drop in sales in the fourth quarter.

Despite the numbers and warnings, the retailer’s chief executive, Helena Helmersson, said the company would emerge stronger from the crisis.

“With strong and profitable online growth and good cost containment, we managed to end the year in profit and with a solid financial position. Taking decisive action quickly, combined with an attractive customer offering, has enabled a better-than-expected recovery until the second wave of the pandemic hits, ”she said.

READ MORE: Boohoo confirms negotiations for the purchase of three Arcadia brands

The coronavirus pandemic has forced the retailer, which was struggling before the crisis, to adjust from in-store sales to increased online sales.

It had already shifted its focus from street expansions to online engagement before the pandemic, amid stiff competition from rivals Zara, Primark and online retailers Boohoo (BOO.L) and Asos (ASC.L) ).

Nevertheless, he plans to open around 100 new stores this year. But 350 stores are expected to close during the same period, mostly in established markets.

Additionally, he said his financial position remained “strong” with good liquidity, with his board saying there were “good prospects” for a cash dividend in the fall of 2021.

Boohoo and Asos recently confirmed “exclusive talks” to buy the remaining retail interests of the Arcadia pillar.

According to Sky News, Boohoo is leading the race to snatch Dorothy Perkins, Burton and Wallis for an estimated £ 25million ($ 34million).

Any deal would be for brands, not department stores, and could close Green’s remaining retail interests and the closure of all 444 stores in his retail empire.

Meanwhile, Asos is the forerunner to acquire its Topshop, Miss Selfridge, Topman brands, as well as fitness brand HIIT. Asos will pay more than £ 250million ($ 343million) to Topshop, according to the broadcaster.

The Evans brand of Arcadia was sold to Australian City Chic for £ 23million last month.

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