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Discount data shows how H&M saved itself from potential bankruptcy

4 months ago by Joshua Fruhlinger in Markets

At one point in time not too long ago, H&M ($STO:HM-B) was a beacon of fast fashion, turning over heavy sales and reaping big margins as shoppers flocked to its rapidly expanding network of affordable stores. But as the company expanded aggressively, inventory overhead cast a cautionary light over the retailer.

In response, H&M slowed its expansion plans by 26% as it scrambled to stay ahead of a troublesome mall and retail environment that has taken rival Forever 21 ($FOREVER21) to the brink of bankruptcy.

So far, H&M appears to be weathering the storm, with reports that it has reduced a concerning buildup of unsold garments, reporting that inventory dropped as a proportion of sales from a high of 18.9% to 18.2% as of last August.

This reduction came as a result of discounts on summer clothes last year. But how much were those discounts and when did they begin? We have that data.

A discount blitz at the retailer began in the 2018 new year, with average discount across inventory jumping from 38% to as much as 47% by May. As reported by Yahoo Finance, H&M was selling faux leather biker jackets and skinny jeans for as little as $8.99.

It appears to have worked. Analysts are positive on H&M's next steps. A sober footprint expansion plan combined with reduced inventory overhead points to calmer waters for the fast-fashion giant.

As of today, H&M operates 4,500 stores in 62 countries. It is second only to Inditex (of Zara ownership) when it comes to global clothing retail.

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Joshua Fruhlinger

Joshua has been writing about technology, lifestyle, and business for over 20 years. He's one of the original writers and editors for Engadget, and still writes a...

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