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H&M Reports Unsold Clothes Reaches New High
H&M's pile of unsold garments grows to value of $4 billion as earnings plunge (CCSS Level: Grade 8, Words: 288)
Mar 29, 2018 Style & Living
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Swedish fashion retailer Hennes & Mauritz AB said it is chopping prices even more this quarter after building up a record pile of unsold garments worth more than $4 billion (NZD 5.5 billion).

Operating profit fell 62 percent to the lowest level in 16 years as clearance sales failed to reduce numbers of T-shirts and jeans that customers had not bought. The stock slumped to its lowest level since 2005.

H&M's already-downbeat forecast for the start of 2018 was made worse by unseasonably warm European weather in January followed by February's cold snap, upsetting normal buying patterns. That forced the company to slash prices even more to try to clear the backlog.

CEO Persson forecast that the retailer would reduce inventory to 12 percent to 14 percent in 2019.

H&M said most of that is spring garments, though a small portion is older than 12 months.

"We haven't improved fast enough," said the 43-year-old member of the billionaire Person family. "We're working hard to fix that."

The retailer is starting a new brand called Around to sell clothes from various brands, including H&M, at a discount, and it's adding three automated logistics centres this year to speed up deliveries.

Last month, H&M forecast sales would drop this year before returning to growth in 2019. "The next 12-18 months will be challenging," wrote Barclays analyst Alvira Rao, who said the initiatives may not be enough to keep up with increasing competition.

H&M might have e-commerce in place in all its markets by 2020, Person said. This month, the retailer began online sales in India and launched H&M on Alibaba Group Holdings Ltd's small service in China. The retailer doesn't plan any more new brands this year.

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