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Hennes & Mauritz AB, the Swedish clothing retailer at the center of a Chinese social-media backlash, attempted to smooth over the controversy by affirming its commitment to China.
Chinese social-media users have been calling for a boycott of H&M and other retailers after a previous statement by the retailer expressing concerns about forced labor in Xinjiang. H&M signaled Wednesday that ethical purchasing is still a priority, without mentioning Xinjiang.
“We want to be a responsible buyer, in China and elsewhere,” Chief Executive Officer Helena Helmersson said Wednesday on a call with analysts about first-quarter results. “Together with all relevant stakeholders, we want to collaborate to be part of the solution and jointly build a more sustainable fashion industry.”
Global brands are facing a dilemma over whether to embrace cotton from the Xinjiang region or risk being boycotted in the world’s second-biggest economy. China has become H&M’s third-largest market and was the source of more than $1 billion in revenue last year. The company has about 500 stores on the mainland, where H&M has been operating for 30 years, and landlords of at least six shops closed H&M shops given the sensitivities.
The retailer is “treading on eggshells,” RBC analyst Richard Chamberlain said. “We have seen brands like Nike and H&M weather similar controversies in the past and maintain relatively strong sales, however short term we think H&M may see a negative impact.”
Read more: Nike China Boycott Brushed Off by Investors Used to Controversy
About 20 stores in the country are shut, but the CEO wouldn’t say whether those closures are linked to the social-media backlash.
H&M swung to a pretax loss of 1.39 billion kronor ($160 million) due to pandemic-related store closures and discounts to clear out inventory after Christmas. That was better than analysts expected, though it’s only the second time H&M reported a quarterly loss since 2000, according to Morgan Stanley analyst Geoff Ruddell.
The stock fell as much as 2.7% in Stockholm, reducing its gain this year to 16%.
Read more: Boycott Battles May Not Go China’s Way: Clara Ferreira Marques
The Swedish retailer forecast a strong recovery in the rest of the year. In January, CEO Helmersson said the company was still in “crisis mode.” The first quarter typically contributes less to profit than the rest of the year as it includes post-Christmas clearance sales.
Sales surged 55% in March, the first month of H&M’s second quarter, though that’s because of the easy comparison with last year, when worldwide lockdowns started. Revenue was about 12% lower than the March 2019 level, according to analysts at Jefferies.
Still, inventory remains a perennial issue, rising 10% in constant currencies and reaching almost 22% of 12-month revenue, double the level at Zara owner Inditex SA.
H&M said it may pay a dividend in the autumn though it won’t propose one yet at its annual shareholder meeting in May.
— With assistance by Hanna Hoikkala
"smooth" - Google News
March 31, 2021 at 01:17PM
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H&M Tries to Smooth Over Chinese Social-Media Backlash - Bloomberg
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