Industry Analysts Are Concerned About H&M’s Future

Despite incredible sales, H&M inventory problems are overshadowing the retail company’s success. The retailer has been slashing prices and concerning industry analysts and investors.
Industry Analysts Are Concerned About H&M's Future

H&M has long been a go-to for affordable shopping and fashion-forward designs, but the retailer’s recent low, low prices are worrying industry analysts and investors.

Inventory issues are something that H&M has been battling for the better part of the year.

The Swedish retailer didn’t have the best 2018.

A snag in supply and demand created massive inventory interruptions for the retailer. H&M made headlines earlier this year for having incredibly bloated inventories, with an excess of $4 billion worth in product. With a massive surplus of clothing, footwear, and accessories, the fast-fashion retailer was forced to cut costs.

H&M inventory

“H&M’s issues will take a long time to fix,” Michelle Wilson, an analyst at Berenberg told Bloomberg. “The inventory problem has now rolled on for the seventh quarter.”

One of the difficult decisions H&M had to make was to cut one of its brands. The retailer announced earlier this year that it would be shuttering Cheap Monday, a once-popular Swedish brand that it acquired 10 years ago. Cheap Monday’s flagship store and e-commerce platform will close by the end of 2018, and the entire brand will shut down by the summer of 2019.

H&M inventory

Analysts are concerned about how H&M has been dealing with its inventory problem.

In addition to shuttering Cheap Monday, H&M has been slashing prices at namesake stores. The decision was made in order to clear out unsold product.

Not so surprisingly, shoppers have been reacting well to the lowered prices — it’s hard to resist a good deal! And the Swedish fashion chain released an incredible report for the past quarter. It is the strongest growth that the company has seen in the past three years.

H&M inventory

But despite record sales, industry analysts are concerned about the brand, and the long-term effect the deep discounts have on the retailer’s future.

While H&M sold a lot, Business of Fashion notes that it is possible that much of the sales growth wasn’t very profitable, with sweaters starting as low as $9.99. It will also be hard for H&M to raise prices in the upcoming months.

Full results of 2018 sales will be published at the end of January, and only time will tell what the future holds for H&M.

Featured image: Instagram/@stephanieee_ann