STOCKHOLM (Reuters) – H&M plans to close hundreds of stores next year as the coronavirus crisis drives more shoppers online, the world’s second biggest fashion retailer said on Thursday, after reporting a smaller than expected drop in third-quarter profit.
H&M, which over decades expanded its network of shops around the world, will aim to cut their number by a net 250 next year, representing 5% of its current network.
H&M has been shutting more stores and opening fewer over the past couple of years as it adapts to the online shift that is driving more competition. The retailer said earlier this year its net number of stores would decline already in 2020.
The company also said sales had continued to recover in September from the impact of the virus.
Chief Executive Helena Helmersson 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.”
Rival fashion retail groups have also seen a recovery, with market leader Inditex, the owner of Zara, reporting a return to profit in its May-July quarter.
“Overall, Q3 is a better quarter than expected and we think H&M continued to manage well what they could directly influence,” analysts at JPM said in a note.
“We think that the market is still not fully appreciating the improved quality of H&M business model and infrastructure. We think instead that this set of results is further proof that H&M turnaround is still very much well on track.”
H&M’s shares were up 6.0% at 0804 GMT.
The Swedish company’s pretax profit fell to 2.37 billion crowns ($265.6 million) in its fiscal third quarter, from a year-earlier 5.01 billion. Analysts polled by Refinitiv had on average seen a 2.03 billion crown profit.
H&M had already flagged that the profit would land at around 2 billion crowns helped by cost cuts as it recovered more quickly than expected.
In the March-May quarter, the pandemic had pushed H&M into a steep loss, its first in many decades, as sales halved.
H&M said its September sales were down 5% year-on-year in local currencies after they fell 19% in the three months through August.
Of more than 5,000 stores worldwide, 3% remain temporarily shut against around 80% at the height of lockdowns, it said.
H&M, which has struggled for years to stop a rise in inventories, said those were unchanged from a year earlier. Markdowns increased half a percentage point, and H&M predicted they would grow 1-1.5% in the current quarter.
Reporting by Anna Ringstrom; additional reporting by Johannes Hellstrom and Colm Fulton, editing by Niklas Pollard and Jane Merriman.