Retailer H&M has an itsy bitsy problem. An itsy bitsy $4.3 billion problem.
The Swedish fashion retailer has announced in its recent quarterly report that there’s a slight inventory issue, and it’s not the good “we can’t keep up with demand” kind, but instead the “we have about $4.3 billion of clothes we can’t get rid of” kind.
This is obviously bad news for H&M, and the market is reacting — profit took a 61 per cent dive in the first quarter and, at the time of writing, the label’s stock was at its lowest point since 2005.
The buildup of unsold clothing likely began last year, when H&M announced its first quarterly decline in sales in over two decades. Like other in-store retailers, the fast-fashion giant has struggled to keep up with the consumer shift to online shopping. That, combined with some unexpected weather patterns in Europe that left fashion brands struggling to stock the right clothing at the right time, meant there was a huge pileup of T-shirts and jeans that not even the best clearance deal could get rid of.
It’s kind of a fun problem to picture (for those not holding any H&M stock, anyway). What does $4.3 billion dollars of H&M clothes even look like? Like, how many warehouses or football fields or bathtubs full are we talking?
They could probably clothe all of Europe’s amateur soccer teams twice over with that may leftover tops and bottoms.
Despite all this, the world’s second largest clothes retailer remains optimistic about the shifting markets.
“As communicated previously, the start of the year has been tough,” said Karl-Johan Persson, CEO of H&M. “2018 is a transitional year for the H&M group, as we accelerate our transformation so that we can take advantage of the opportunities generated by rapid digitalisation.”
H&M has indeed had a rough go this year. In January, the brand had to close shops across South Africa after protests broke out in stores over its controversial “Coolest monkey in the jungle” shirts. And now, its shops are swimming in unsold clothing while consumers are at home buying digitally.
The only way brands are going to make it in this new digital age is to adapt, and this latest report proves that H&M has its work cut out.