We can go back into the store, but it won’t get any cheaper. This also applies to the clothing industry, which is no longer thwarted by corona closures, but is faced with higher costs.
The Swedish clothing giant H&M, Hennes & Mauritz in full, is one of the largest brands in the world. The chain (annual turnover 19 billion euros) is active in 75 countries and has more than 4,700 stores. In addition to the H&M branches, this concerns stores of subsidiary brands such as COS, Monki and Weekday.
In the latest annual figures, H&M proudly stated that the group turnover will have doubled by 2030 at the latest, while the ecological footprint has been halved at the same time. To achieve these goals, the company is increasing its investments. This year, at around 950 million euros, this is a doubling, mainly spent on digitization, the supply chain, renewable energy and more sustainable materials. The target: an annual turnover growth of 10 to 15 percent, according to top woman Helena Helmersson.
For the time being, this ambitious growth plan has had a false start. After the latest quarterly figures, H&M’s share price fell by about 13 percent at the end of March. The recovery after the corona crisis was disappointing with 6 percent growth, according to investors. The company was forced to close 185 stores in Russia, Belarus and Ukraine because of the war. According to the company, this cost the company a 5% turnover growth. But what struck me most: the decision to raise prices in the store, just like competitors.
This higher clothing price has several causes. For example, cotton prices more than doubled last year. “But the costs for transport and energy are still very high,” says retail economist Henk Hofstede of ABN Amro. “If this continues for longer, it is expected that these costs will eventually be passed on to the customer. In April we already saw that the costs for clothing have increased by 8 percent compared to last year.” The question is to what extent H&M’s price-conscious customer will accept these increases.
At the same time, Hofstede sees that the sale of clothing has ‘improved quite a bit’ in recent months, driven by ‘catch-up demand’ in the stores – after the pandemic – and also by online sales. He considers it indispensable that a party such as H&M invests more in digitization. “Especially for the younger consumer, most of whom do their research on the web before visiting the store.”
Like competitors Zara, Primark and Esprit, H&M is known as a supplier of fast fashion: Using data to respond quickly to fashion trends with cheaper, lower-quality clothing that consumers wear for relatively short periods of time. In short: clothing as a disposable product – something the company itself readily acknowledges.
“That’s the business model and I don’t see that changing anytime soon,” says Dirk Mulder, retail expert at ING. “You do see that parties such as H&M and Zara are looking hard for sustainable materials and a profitable way to process worn clothing into new products.”
This so-called circular clothing is a pillar of the sustainable ambitions. In 2017, H&M set the goal to only produce more clothing with 100 percent sustainable materials by 2030. The target of a halved footprint† Mulder: “That seems contradictory if you simultaneously say: growth, growth, growth. But increasing sustainability takes place step by step, these are large clothing chains that do not change overnight. So it is important to start now.”
On Wednesday, the group will announce the sales figures for the second quarter (which runs from March to May at H&M).
A version of this article also appeared in the newspaper of 13 June 2022