Following today’s release of H&M’s figures for FY2021/22; Darcey Jupp, apparel analyst at GlobalData, a leading data and analytics company, offers her view: “Though the H&M Group achieved revenue growth of 12.4% to SEK223.6bn (+6% in local currencies) in FY2021/22, its revenue still remains 4.0% behind FY2018/19 levels. While it will have been impacted by the tough macroeconomic climate in its home European market in H2, it is now lagging far behind key rival Inditex, which was already up 16.7% versus pre-pandemic in the nine months to 31 October 2022. It is finally admitting the inherent troubles within its eponymous brand, with CEO Helena Helmersson stating that it is working on improving product assortments and customer experience. Taking these steps will be vital for H&M to regain competitiveness against Zara, which excels in both areas, however muted sales growth of 5% in local currencies between 1 December 2022 and 25 January 2023, despite it being the first Christmas period without COVID-19 restrictions, proves it could be too little, too late for the group, as consumers have already begun reducing apparel spend and have become more selective over the brands they shop with, so H&M is likely to have another challenging year.
“The group’s operating profit margin in FY2021/22 was slashed 4.5ppts to 3.2% amid rising costs across the business, resulting in operating profit declining 52.9% to SEK7.2bn. At its lower mass market price positioning, H&M should be cautious of further price rises as it faces a greater risk of its shoppers trading down to value competitors like Primark and Pepco, so a focus on championing value for money and compelling, trend-led product ranges will be vital for the group to protect its margins from decreasing further. H&M’s intention to focus more on sport, beauty & home is wise, as these areas will be more resilient than clothing & footwear amid the worsening macroeconomic conditions in 2023.
“While H&M has often been considered a digital laggard, it has made continuous improvements post-pandemic to its online offer, resulting in group online penetration of c30% in FY2021/22, which is a strong result considering it is flat on the year prior which included pandemic restrictions. Furthermore, the group continues to innovate within the lucrative rental and resale markets, launching a rental service in its newly-revamped H&M Regent Street store in London to complement its online service. Its online resale platform, Sellpy, has seen great success, with sales increasing 85% in FY2021/22 and forecast to exceed SEK1bn in FY2022/23. Allowing shoppers to buy secondhand products from Sellpy on its Swedish and German H&M websites should help make this target more achievable, and H&M should consider expanding this into more European countries, particularly as its platform will likely outpace the European apparel resale market, which GlobalData forecasts to grow 22.2% to $59.7bn in 2023.”
