H&M is the latest high profile retailer to cry foul over the prolonged impact of the COVID-19 pandemic. The fashion retailer has announced plans to shut down 250 of its stores globally, after seeing its sales tank in the aftermath of the epidemic.
The cuts are part of the Stockholm-based rapid and decisive action needed to manage the coronavirus’s impact. The closures come at a time when H&M is also planning to renegotiate lease agreements for its other stores. The company hopes to secure deals for lower rents in existing stores.
The closure does not come as a surprise, given the changes in the retail sector. Consumers shopping patterns have shifted to online, conversely affecting traffic to brick and mortar stores. The Sweden fashion retailers operate close to 5,000 brick and mortar stores worldwide.
The 250 unnamed stores’ closure will result in H&M moving a good chunk of their operations online. It is also unclear the number of employees that the store closures will affect. The restructuring drive comes amid an uptick in-store sales in the aftermath of the pandemic. The easing of lockdown restrictions and social distancing policies has resulted in an uptick in traffic to stores.
Retail Sector Disruption
While sales in stores have improved significantly, it is still below the pre-pandemic levels. The company’s pretax profit fell to 210 million in the nine months ended 31, August much better than what analysts were expecting. The better than expected profit, came despite 166 stores remaining closed during the period.
In response to the pandemic, H&M has confirmed plans to accelerate its digital investment to cope with growing online demand. Focusing on online sales should allow the company to trim its inventory levels that increased by more than 21% over the past 12-months.
H&M is not the only retailer feeling the pressure owing to the COVID-19 disruptions. Store closures and job cuts have become the order of the day. Mark & Spencer has already confirmed plans to cut about 7,000 jobs.
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