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’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.
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.
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