H&M NewYork
by Stephen Garner

H&M NewYorkSwedish fast-fashion retailer H&M Group has laid out a new turnaround plan that includes the biggest store closure program for the retailer in at least a decade and the creation of a new brand to sell marked-down clothing.

In 2018, the H&M group plans to close approximately 170 stores even as it plans to open in new markets like Ukraine and Uruguay, and plans to add a new store format called Afound, which joins the main H&M chain and other recent additions like Arket. The retailer said it would invest more in online sales and digital inventory-tracking technology while adding shops in markets that are still growing.

“The fashion industry is changing fast,” said Karl-Johan Persson, CEO of H&M. “At the heart of the transformation is digitalization and it is driving the need to transform and re-think faster and faster. This is presenting many challenges but we believe we are well-placed to adjust to the new dynamics and take advantage of the opportunities in front of us.”

Persson continued: “Our performance during 2017 was mixed, with progress in some areas but also difficulties in others. We delivered growth of 3 percent in 2017 which is clearly below our expectations. In the fourth quarter, our sales overall decreased by 2 percent in local currencies. Our online sales and our newer brands performed well but the weakness was in H&M’s physical stores where the changes in customer behavior are being felt most strongly and footfall has reduced due to more sales online. In addition, some imbalances in certain aspects of the H&M brand’s assortment and composition also contributed to this weaker result.”

Given all of this, the company is still planing 390 new stores. About a quarter of the new shops will be formatted other than the flagship H&M, such as COS, Monki, and Afound. The latter, the company’s ninth format overall, will consist of stores and websites that offer deals on the company’s own goods as well as merchandise from third parties.

The first Afound store will be in Stockholm, and the site will go online in Sweden this year. H&M is building a format where it can funnel off excess inventory and is entering part of the market that discount retailers such as Primark and supermarkets have proven can be successful. Afound is a shift in strategy following the last new format, Arket, which sells higher-priced general merchandise, including houseware, purses, and coffee.

“We see big potential for Afound and are looking forward to introducing the marketplace to our audience in Sweden in 2018,” said Fredrik Svartling, managing director of Afound. “Afound cares about both the value of the products and the mix. And by offering personal style inspiration, quality labels, and the sense that you’re getting a really good deal, Afound will offer a new form of off-price experience.”