Retailer H&M announced it will close about 170 stores by the end of this year, 40 more than it had originally planned after reporting a drop in sales during the second quarter of 2020.
The Swedish firm reported that net sales were down 24 percent between Dec. 1 and May 31, and they were down 50 percent during the second quarter. It blamed the CCP (Chinese Communist Party) virus pandemic and associated lockdowns for the decline, according to a report from the company (pdf).
“The H&M group has taken rapid and forceful action to manage the COVID-19 situation. This has been done in all parts of the business, including areas such as product purchasing, investments, rents, staffing and financing. Since the majority of stores were closed, there was greater focus on the digital sales channels,” according to its earnings report.
As a result, the company will close down 40 more stores than originally planned and will cut back on new store openings. H&M added that it will be a net decrease of 40 stores.
The firm said it is doing so because it expects the CCP virus pandemic to have a lasting effect on how people buy clothes, adding that more people have turned to online shopping.
“It is clear that the rapid changes in customer behavior caused by the pandemic will further speed up the digitalization of fashion retail,” H&M Group CEO Helena Helmersson said in the earnings release.
“To meet this, we are continuing to adapt the organization and improve our ways of working, which will make us more flexible, fast and efficient. We are accelerating our digital development, optimizing the store portfolio and further integrating the channels,” she added.
Throughout the pandemic, a number of retailers have filed for Chapter 11 bankruptcy, announced store closures, or both.
JCPenney became perhaps the most famous company to file for bankruptcy, while it announced that more than 150 locations would be shuttered by the end of the summer.
“While closing stores is always an extremely difficult decision, our store optimization strategy is vital to ensuring we emerge from both Chapter 11 and the COVID-19 pandemic as a stronger retailer with greater financial flexibility to allow us to continue serving our loyal customers for decades to come,” Chief Executive Jill Soltau said in a statement several weeks ago.
J.Crew on May 4 filed for bankruptcy. Neiman Marcus and Stage Stores filed for bankruptcy days later.
In mid-June, 24 Hour Fitness announced it would file for bankruptcy, blaming the COVID-19-linked shutdown as the reason why.