The fast fashion specialist boosted its profitability in 2021 and demonstrated the solidity of its model.
Fast fashion is far from having said its last word, as evidenced by the performance of H&M. The Swedish giant’s net profit rebounded spectacularly in 2021 (financial year ending at the end of November), reaching 1.05 billion euros (120 million in 2020). Turnover increased by 6% to 19 billion euros.
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However, the context was not obvious, the Covid having again led to store closures last year. But the group, which notably owns the H&M, COS and Arket brands, has continued to develop digitally, with its online sales now representing 32% of the total. Having given up buying cotton from the Uighur-populated province of Xinjiang, H&M consequently suffered a boycott campaign in China that caused its sales to drop by 40% at the end of the year.
The very strong rebound in sales in the United States (+31% in the fourth quarter), the United Kingdom and France (+20%) more than offset this drop. From now on, China is the eighth market of the Swedish group, and no longer the third, which is rather an advantage at a time of increasing tensions with this country.
buying power
In the fourth quarter, the turnover of the world number 2 in ready-to-wear thus returned to its 2019 level. The number 1, the Spanish Inditex (brands Zara, Massimo Dutti, etc.), had succeeded in exceed this level from the start of 2021. This demonstrates the constant appetite of consumers for clothes and accessories at low prices, and constantly renewed. The success of the Chinese Shein, which has become the leading online fashion site in France, is further proof of this.
The two fast fashion leaders are also adapting their offer to ecological aspirations: H&M has committed to selling 100% eco-responsible products by 2030 and to halving its carbon footprint. These giants are above all commercial war machines, which through investments – nearly 1 billion euros planned for 2022 for H&M – have set up an omnichannel offer, where the physical and digital circuits are completely intertwined. These groups are constantly redeveloping their stores to keep up with market expectations: last year, H&M closed 321 and opened 104. Another advantage linked to the size, purchasing power and solidity of relations with suppliers, which have enabled the Swede, according to its management, to cope more easily with global supply difficulties.
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H&M is therefore optimistic and aims to grow its turnover by 20% in 2022, a catch-up year, and to double it by 2030. All with an operating margin exceeding 10%. In this regard, the group exceeded analysts’ expectations in the fourth quarter (11%). It held its costs down, through rent renegotiations, a reduction in the workforce or the limitation of discounts. “Now that we are in a more normalized situation with a strong financial position and good profitability, we can fully focus on growth again,” concluded CEO Helena Helmersson.