H&M Sales Fell 50% In The Second Quarter, How Fast Fashion Counter Attack?

Under the shadow of the epidemic, the fast fashion brand that originally faced the survival dilemma is even worse.

In June 15th, the Swedish fast fashion group H&M released its second quarter earnings report in 2020. In the three months ended May 31, 2020, net sales reached 28 billion 600 million kronor (2 billion 400 million pounds), down 50% from last year's year; online sales increased by 36% in the Swedish krona, and increased by 32% in local currency.

For the reasons for the decline, H&M group said that due to the impact of the new crown pneumonia epidemic, most stores in the market must be temporarily closed. As of mid April, about 80% of the H&M group's stores were temporarily closed, which had a great impact on retail sales.

However, since the end of April, H&M group has begun to re open more stores in accordance with local policies. However, because the conditions are different, the pace of sales recovery between markets is also very different. At present, about 900 stores (temporarily accounting for 18% of the H&M group's 5058 stores) are still temporarily closed, and 48 of the 51 online markets of the H&M group sell online.

In addition, H&M group announced in the early June that it will temporarily close 95 stores in the United States. Due to the influence of racism and discrimination in the United States, many brands of H&M brands in the United States have been smashed to varying degrees, resulting in incalculable losses.

In fact, more than H&M, the performance of a fast fashion brand is declining, and the performance of another fast fashion giant ZARA is also dim. ZARA's parent company Inditex Group recorded a net loss of 409 million euros in the first quarter, and its total sales fell by 44.27%, the first time that ZARA has suffered a loss.

Many of the reasons for the decline in the performance of fast fashion are attributed to the impact of the new crown pneumonia epidemic, which is just an accelerator for their performance decline.

Compared with past earnings data, H&M began to show a decline in its performance in 2017, a 13% drop in 2017 and a 62% decrease in the first quarter of 2018. Until the third quarter of last year, H&M's performance was only slightly warmer. Net profit achieved the first increase after the eight consecutive quarterly decline.

As the world's third fastest fashion giant GAP, the days are also tough, and can be described as "deteriorating". GAP net profit plunged 65% to $351 million in 2019, and on the way to closing stores continuously, and GAP sales in the first quarter of 2020 will be 100 million dollars.

Not only that, GAP's share price has declined all along, but since February of this year, the stock price of GAP group has fallen by nearly 60%, and the market value has evaporated about 4 billion US dollars (about 28 billion yuan).

It is noteworthy that the GAP group began to adjust its business and shut down its brand Hill City, and plans to withdraw its Old Navy from the Chinese market, and GAP stores began to further reduce, and said its brand will close 170 stores in the coming year.

ZARA Inditex, the parent of fast fashion giant, has announced that it will close 1200 stores worldwide, equivalent to 16% of the total number of stores in the world. If Inditex group closes its stores on a large scale, the total number of stores will be reduced from more than 7400 to 6200.

In fact, not only fast fashion brands have been affected by the epidemic, but also the global garment industry has been affected to varying degrees. But the heavy casualties are unavoidable and irreversible. The important concerns of brands are how to survive, whether they are closing stores, discounting, layoffs or exiting part of the international market, in order to save operating costs, and constantly seek new channels to open new breaking points.