Another Huge Global Retailer Plans to Close Large Number of Stores

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H&M is not among the best-known retailers in the United States, although it has fashion stores in America. The Swedish company is one of the largest store chains in the world. As it announced its earnings for last year, management said it would close 170 stores, making it the most recent retailer to yield to the advance of e-commerce.

H&M Group owns a number of brands: H&M and H&M Home, COS, & Other Stories, Monki, Weekday and ARKET. Among them, the company has over 4,700 locations in 69 countries. In 2018, it will have net store growth. Management announced:

In 2018 the H&M group plans to open approximately 390 new stores and approximately 170 store closures are planned, resulting in a net addition of approximately 220 stores. New planned H&M store markets are Uruguay and Ukraine.

Additionally, it plans to open e-commerce operations in India, and it has just launched online businesses via franchises in Saudi Arabia, the United Arab Emirates and Kuwait.

CEO Karl-Johan Persson framed the company’s challenge, which is faced by virtually every other large retailer in the world:

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 behaviour are being felt most strongly and footfall has reduced with more sales online.

It is more than a broad hint that the future of H&M Group is not in stores but via e-commerce. And, as it expands online, it has found itself and will continue to be tremendously challenged by Amazon.com and Amazon-like operations around the world. It is only a matter of time that H&M will continue to retreat from some markets. And, eventually in most of its markets, physical stores will be harder and harder to maintain.

Like most of the few other huge global retailers, particularly Walmart, H&M has the sale heft to expand opportunistically in markets in which it believes stores can still prosper. Like Walmart, it has the balance sheet and brands to make a larger push online than almost any other retailer. However, it will need to drop its store count as it suffers from the inexorable advance of consumers who prefer to shop from their personal computers and smartphones.