H&M share price slips amid plans to axe 170 stores

H&M share price slips amid plans to axe 170 stores

Swedish fashion tycoon Hennes & Mauritz AB (STO:HM-B) – popularly known as H&M – has announced its plans to permanently close 170 stores across Europe, knocking its share price down 1.40%.

The move is said to be a response to plummeting sales during the coronavirus crisis, which caused the retail sector to grind to a halt in March when governments worldwide implemented strict lockdown measures to contain the spread of the virus. H&M recorded an eye-watering 50% fall in sales during the peak of the crisis.

As well as shutting 170 sites across Europe, the closures are expected to put thousands of jobs at risk, adding to the record levels of UK unemployment. Last month, Chancellor Rishi Sunak warned of “tragic projections” for the jobs market in the months ahead as the government’s furlough scheme begins to wrap up by October.

It is not yet clear how many of H&M’s 300 UK stores will be affected by the brand’s decision, but the move follows the chain’s ongoing pledge to focus more on its online potential. The company already offers online shopping to 33 countries around the world. However, the widespread “stay at home” initiative during the pandemic caused a record surge in online sales, and H&M joins a long list of chains keen to capitalise on the shift towards remote shopping.

Since non-essential stores were given the go-ahead to reopen in England last month, hundreds of H&M sites have opened their doors to customers once again for the first time since March. High street footfall is still much lower than expected for this time of year however – down 53.4% on July 2019 – and the retail sector faces a steep uphill battle before it can recover to pre-crisis levels.

H&M chief executive Helena Helmersson remained optimistic despite the store closures, citing the brand’s resilience in the face of the pandemic and its historic commitment to online and sustainable fashion:

“I am full of admiration for our employees’ commitment, drive and perseverance during this very challenging time. As we have reopened our stores, sales have begun to recover at a faster rate than expected.

“Before the pandemic hit, we performed strongly – a result of many years of long-term investments to create the best offering for our customers and to meet the digital shift in the industry. This, combined with the fact that we have acted quickly to counter the negative effects of Covid-19 and that we are speeding up the transformation of the H&M Group, makes me convinced that we will come out of the current crisis stronger.

“To meet the rapid changes in customer behaviour caused by Covid-19 we are accelerating our digital development, optimising the store portfolio and further integrating the channels. With our ambitious sustainability work we want to continue to lead fashion retail towards a more sustainable future”.

Investor insight

H&M’s share price slipped 1.40% on the company’s news, down to SEK 140.55 at CEST 13:57 07/07/20, still decidedly better than the 24% free-fall on last year’s figures recorded in June. The chain’s dividend yield sits firmly at 6.94% and its P/E ratio at 46.45.