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STOCKHOLM – Fast fashion giant H&M has offered an interim financial update which highlights the dramatic impact of Covid-19 on clothing sales. The business says total sales during the period 1 March – 6 May this year decreased by 57 per cent in local currencies compared with the same period in 2019. Some markets were hit much harder than others, with Italy (down 80 per cent), Spain (down 76 per cent), USA and France (both down 71 per cent) seeing the biggest falls. Sweden, which has not imposed severe lockdown restrictions, saw a fall in sales of 31 per cent, while South Korea’s sales fell just 11 per cent.

Over the same period, H&M’s online sales grew by 32 per cent compared to the same period last year.

H&M said that around 80 per cent of its stores have been closed since mid-March. From the end of April onwards the H&M group started gradually reopening stores in a number of markets. “In those markets that have begun to open up, trade in the stores has initially been muted,” the company said in its update. The news that even stores that are open are seeing ‘muted’ business will be a severe worry for all apparel retailers. Since the onset of Covid-19, there has been hope of a bounce in sales once stores reopen. If H&M can be viewed as a barometer of the industry, clearly that is not going to happen.

H&M added that, at present 3,050 stores, representing 60 per cent of the group’s 5,061 stores, are still temporarily closed.

Added the statement: “To offset the negative sales development a range of rapid and forceful measures are being implemented in the areas of purchasing, investments, rents, staffing and financing. As at 30 April the stock-in-trade amounted to just above BSEK 41 (40). “Costs for markdowns are expected to decrease in absolute figures in the second quarter compared with the second quarter of 2019, but since sales will be significantly lower the markdowns are expected to have a negative effect on the gross margin of 2 – 4 percentage points. The assessment based on current information is still that operating expenses excluding depreciation and amortisation will be reduced by approximately 20-25 percent in the second quarter compared with the corresponding quarter 2019.

“As communicated previously, the second quarter will be loss-making since the measures implemented will not compensate for the substantial drop in sales.

“The H&M group’s liquidity is good. As at 30 April cash and cash equivalents plus unutilised credit facilities totalled BSEK 23,8. The group’s work is focused on ensuring financial flexibility and freedom of action on the best possible terms in a challenging market where business opportunities are also arising. The group is therefore working to secure additional credit facilities in parallel.”

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