Fashion giant H&M said it is closing 250 of its stores globally next year as the Covid-19 pandemic continues to accelerate a major switch to online shopping.
H&M, which is the world’s second biggest clothing retailer, said that around a quarter of its 5,000 stores are able to renegotiate or exit contracts next year, allowing it to shut around five per cent of its shops for good.
The locations of the shop closures, how many jobs will be axed and whether or not any UK stores will be affected, remains unclear.
The update came as the Swedish company said it had seen trading continue to recover in September, but sales remained 5 per cent lower than at the same point a year ago.
H&M’s total sales fell by 16 per cent to £4.4billion for the quarter to August.
Around 900 H&M stores were closed to customers at the start of the period amid global lockdown restrictions. The company has over 3,000 stores in the UK, which is more than in its headquarter base of Sweden.
By the end of the last quarter, around 166 H&M stores around the world remained shut, the group said today.
The retailer also reported that its pre-tax profits fell to £210million for the nine months to 31 August, beating analyst expectations.
H&M said it had taken ‘rapid and decisive action’ to manage the impact of the virus, addressing this with changes to purchasing, investments, rents, staffing and financing.
The company said it was stepping up its transformation plans with increased digital investment after seeing shopper demand rise across its websites.
Helena Helmersson, chief executive of H&M, said: ‘Although the challenges are far from over, we believe that the worst is behind us and we are well placed to come out of the crisis stronger.
‘Demand for good-value, sustainable products is expected to grow in the wake of the pandemic and our customer offering is well positioned for this.
‘We are now accelerating our transformation work so that we continue to add value for our customers.’
In its latest results, H&M added: ‘The H&M group received government assistance in various markets, mainly in respect of rents and staffing.’
On its UK website, H&M says higher demand from shoppers meant its deliveries were taking longer than normal to arrive at people’s homes, with an estimated wait time of between six to eight days.
Online orders placed between 1 March and 7 June are eligible for an extended return policy of 100 days. But, online orders made outside these dates still have to be be returned within 28 days, H&M said.
Are in-store restrictions off-putting for shoppers?
While H&M has reopened the vast majority of its stores, the experience of shopping in-store has changed markedly in recent months across the entire sector.
Fitting rooms remain closed and shoppers and staff are divided with plastic screens at till points.
In the UK, most people, including retail workers, now have to wear face coverings when shopping, and shops are littered with signs and staff reminding people to socially distance.
For some, the new restrictions involved when shopping in-store will be enough to make them switch more decisively to online shopping. A growing number of retailers are aware of this, and accelerating plans to ramp up their online operations.
Analyst Richard Lim of Retail Economics told the BBC: ‘What we have seen generally over the past few months of the pandemic has been a step change in the number of sales going online.
‘That has affected all parts of the industry, but particularly clothing and footwear.’
Other retailers, like Primark, which does not operate an online shop, will have to rely on ongoing shopper demand for cheap fashion, even during lockdown.
While being tough for in-store shoppers, the pandemic has been worse still for many working within the retail sector.
Last week, Lord Wolfson, the boss of fashion chain Next, warned that hundreds of thousands of traditional retail jobs may not survive in the wake of the pandemic.
Lord Wolfson said there was a clear threat to thousands of jobs, which are now ‘unviable’ because the lockdown has triggered a permanent shift to online shopping.
He said: ‘I wouldn’t want to underestimate the difficulty that is going to cause a lot of people who work in retail, I think it’s going to be very uncomfortable.’
A string of high-street based retailers, including John Lewis, Marks & Spencer and Dixons Carphone have already announced mass job cuts as they battle to maintain their bottom lines and cut costs.