H&M China’s slow recovery paints ‘bleak’ picture of retail post pandemic

Weekly sales data from H&M China stores are a harbinger of what faces the world’s fashion industry after the coronavirus passes, says GlobalData. 

The data shows that while stores are slowly starting to recover from the peak of the coronavirus pandemic in Mainland China, “there has clearly not been an immediate bounceback,” says principal analyst Honor Strachan.

“H&M’s performance in China paints a harsh reality for what is to come across much of the world’s major retail markets, with the US, Spain, Italy, Germany, France, Iran, the UK and Turkey now having the highest number of confirmed coronavirus cases (excluding China) leading to significant slumps in consumer spend on fashion. Moreover, H&M operates in a winning segment of the apparel market, it has the scale to negotiate with suppliers, it has a strong physical portfolio where many stores are new or have been modernised, and stores operate in core retail locations – making its recovery more advantageous than many of its rivals, especially smaller domestic chains.”

“Looking at H&M China’s data, sales were down 79 per cent in week 10 despite 89 per cent of its stores in the country being open, raising the question whether this is a financially viable strategy in other affected markets due to the burden on operating costs. 

“In China, nearly all retailers have now reopened stores, but consumer propensity to spend is significantly higher than in mature retail markets such as the US and much of western Europe so we expect store reopening schedules and the recovery process to be longer than what we have witnessed in China.”

Note: Data labels for weekly sales are sourced from H&M and the trend for the inbetween weeks are GlobalData estimates based on the trend provided in H&M’s Q1 financial update. Weekly change is year-on-year, for instance sales declined 89 per cent in week 7 2020 compared with week 7 in 2019. Store closures sourced from H&M.

Strachan says retailers must start planning a recovery strategy for each country they operate in, taking into account consumer sentiment and confidence, the country’s financial stability, consumer propensity to spend on fashion, online penetration and the time in the season and promotional calendar. 

“All of these factors will impact how and when physical stores should reopen.”

“Understandably retailers will be keen to reopen stores to clear seasonal stock and recover lost revenue, but the impact to profitability by opening these stores too early could be severe.”


He says some retailers may need to consider whether consumer demand after the pandemic’s peak will be sufficient to warrant reopening all stores in any one market at once. 

Retailers in some markets around the world will be able to draw on government support to help them through the recovery stage. For example in the UK, business rates have been suspended, and landlords barred from taking back possession of store space due to unpaid rent. Furthermore, in many markets around the world, including in Hong Kong and Singapore, consumers are receiving cash handouts from governments to help stimulate the economy. In others, governments are providing income for furloughed staff and in that case, it may serve retailers’ interests best to keep store staff out of work until consumers resume spending on non-essential items and footfall recovers.

“Understandably flagship and tier one stores will be a priority to reopen as soon as possible, but retailers must consider what their neighbours are doing in each location as trading from under-occupied high streets or shopping centres will impede traffic and draw out the recovery period.”

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