Business

Tuesday 25 September 2018

H&M plunges as retailer eyes discounts and store closures to revive top line

Investors gave a thumbs-down to fashion giant Hennes & Mauritz's (H&M) turnaround plan, which includes the biggest store-closure program in at least a decade and the creation of a new format to supplement the Swedish clothing company's stumbling main chain. Photo: Getty
Investors gave a thumbs-down to fashion giant Hennes & Mauritz's (H&M) turnaround plan, which includes the biggest store-closure program in at least a decade and the creation of a new format to supplement the Swedish clothing company's stumbling main chain. Photo: Getty

Erich Zann

Investors gave a thumbs-down to fashion giant Hennes & Mauritz's (H&M) turnaround plan, which includes the biggest store-closure program in at least a decade and the creation of a new format to supplement the Swedish clothing company's stumbling main chain.

The company plans to shut 170 stores around the world this year, even as it adds a new format called Afound to sell marked-down merchandise. The retailer said it would invest more in online sales and digital inventory-tracking technology, while adding stores in markets that are still growing.

Shares fell more than 9pc to a nine-year low on Wednesday in Stockholm. They have lost more than a quarter of their value in the past three months. The slump brings H&M's market value to SKr235bn (€24bn), equivalent to about a quarter of what Zara owner Inditex SA is worth.

"There is little in the statement to suggest that H&M can reignite its top line anytime soon," wrote Richard Chamberlain, an analyst at RBC Capital Markets.

The world's number two fashion chain by sales has recently hit a number of roadblocks, reporting the biggest drop in quarterly sales on record. As online shopping has soared, fewer people are visiting H&M's vast network of physical stores. The company has struggled to cut inventory, will increase markdowns in the first quarter and ended the year with net debt for the first time in more than two decades. (Bloomberg)

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