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The unsatisfactory accounts of Hennes & Mauritz (H&M) generate an unexpected change at the top of the Swedish fast fashion giant: even if in the fiscal year 22-23 (between 1 December 2022 and 30 November 2023) sales are increased by 6%, a significant drop of 4% affected the period between December and January – in which sales usually increase, driven by the Christmas period and subsequent promotions – compared to the same period of 2022-23. Profits, although increasing, did not reach the threshold expected by analysts. Sales, however, had also gone badly in the previous months, due, the group reports, to the prolongation of the hot season which delayed purchases of the autumn-winter collections.
Fast fashion in lights and shadows: the numbers and the sustainability issue
For these reasons, the largest fast fashion retailer in the world after the Spanish Inditex, has decided to replace its top management: after four years (and 26 in the group) the CEO and president Helena Helmersson resigned and her role was hired by Daniel Ervér, former head of the H&M brand (the group also includes H&M Home, Cos, & Other Stories, Weekday, Monki, Arket and Afound). Lei Helmersson underlined that she was proud of the work done during the pandemic, but also that she had experienced a “very challenging” period on a personal level. For his part, Ervér said in a statement that «our goal is to offer customers the best combination of quality, price and sustainability in an attractive shopping environment». However, the issue of growing competition with other fast fashion players remains, Inditex first and foremost, but increasingly also the Chinese giant Shein, which is growing thanks to the very competitive prices of its products.
The former CEO also stated that there is a clear trend towards nearshoring, with suppliers no longer located in Asia but in Europe and Latin America, also as a consequence of the transport crisis that is affecting the Red Sea. Furthermore, Ervér said that the group has registered a lot of interest in products with a wider range of prices, understood as higher, than those offered so far, as confirmed by the better performance of the group’s higher-end brands – Cos, Arket and Weekday – compared to H&M’s. Furthermore, Arket will also open its first store in Italy in 2024, a market in which it was not yet present, in a year in which the group plans to inaugurate a total of 100 new stores compared to the closure of 160.
The challenge, in this sense, also concerns the increase in margins: in the last three months of 2023, the ebit margin fell to 7.2% from 7.8% in the previous quarter. The group, however, stressed that it wanted to maintain its “ambition” of reaching 10% this year. So will the way to return to growth pass through an increase in the quality of products and their prices? This solution was also shared by Karl-Johan Persson, nephew of the group’s founder Erling Persson (the family still owns 51% of the group, listed on the Stockholm Stock Exchange since 1974) who in a recent interview said precisely this: we will invest in quality of our offer.