Fast-fashion giant H&M posted strong sales for its latest quarter, indicating that its comeback strategy is working.
The Swedish company says sales rose 6% in local currencies, the fastest quarterly growth in three years, as it continues to make adjustments to combat the logistics woes that have left the second-largest global clothing company with too much inventory (and drastic markdowns.)
It also announced its expanding its home store concept, and shutting down Cheap Monday, a retail brand that focuses on affordable skinny jeans.
H&M has been selling items for the home for almost 10 years, but started opening stand-alone stores earlier this year. The latest announcement heralds the coming of a large store in London’s Regent Street neighborhood, marking the second store in London. Other markets for the home stores include Denmark, Sweden, Norway and Germany.
The stores are meant to be “inspiring interiors destinations” that sell H&M products but other brands as well. With its new concept store, the company says it is “investing in a next-level customer experience.”
Recent weeks have also seen H&M shutter its Cheap Monday brand. “The fashion industry is in a period of extensive change as a result of ongoing digitalization,” it says in its announcement, and as the company continues to concentrate on its turnaround, it’s focusing on core businesses. “Cheap Monday has a traditional wholesale business model, which is a model that has faced major challenges due to the shift in the industry. There has been a negative trend in the Cheap Monday’s sales and profits for a long time,” it says.
Some industry experts have faulted H&M, which announces its full financial report next month, for its small-scale responses to massive industry shifts, including the rise in cheap-chic offerings from online retailers like Amazon, the speedier digital moves of rival Zara (owned by Spanish-based Inditex and the No. 1 apparel retailer), as well as the encroachment of Primark, based in Ireland, and Japan’s Uniqlo.
Others see strength in its scale and brand-name recognition. “We believe that H&M can continue growing by taking some share from weaker mid-price brands, department stores and nonspecialized companies,” writes Morningstar analyst Jelena Sokolova in her most recent report. “Nonetheless, we expect gains to be more difficult than they used to be, as fitter, focused competition continues to emerge (low-cost companies such as Primark, discount firms, and niche and private-label brands made available to wider audiences on platforms such as Amazon or Alibaba, for example).”