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H&M, Next and Boohoo, three takes on the post-pandemic fashion industry

By Angela Gonzalez-Rodriguez

May 10, 2021

Business

H&M Store, Barcelona, Spain. Credits: H&M Official.

After a year worth of pandemic-driven lockdowns, reduced hours, flaky supply chain and evolving consumer needs, the main fashion industry players are sharing their financial updates and forecasts for the upcoming months. FashionUnited takes a look at what H&M, Next and Boohoo have to say regarding the immediate future of their business.

Last week, the CEO of Hennes & Mauritz (HMb.ST) said that the fashion retailer was, despite continued uncertainty due to the COVID-19 pandemic, firmly convinced it would come out of the crisis stronger. CEO Helena Helmersson said ahead of H&M’s digital annual general meeting later in the day that the group was positive as regards opportunities to create sustainable and profitable growth. In a recorded video posted to H&M’s corporate website, she said that the group was developing new business models, initiatives and partnerships to satisfy new customer needs and add more revenue streams. Ending 2020 she summarised the company’s performance in throughout the pandemic highlighting that “The H&M group started the year strongly and with a positive momentum until the first wave of COVID-19 had an impact.” In a financial report from December, Helmersson acknowledged that “Extensive social restrictions involving temporary store closures and large drops in customer footfall to physical stores led to a substantial decrease in sales, particularly in the second quarter.”

Next Plc. Doesn’t want to get carried away regarding 2021 – 2022

Meanwhile, British beloved retailer Next plc. (NXT.L), gained 1.5 percent as it raised its profit outlook for the 2021-22 year for the second time in two months, driving the main blue-chip index in London, the FTSE, further ahead. The bumped stock’s price came after the Next its full-year profit guidance for the second time in two months as it reported better than expected first-quarter trading, but cautioned it did not expect a post-lockdown surge in sales to endure. The fashion chain, which operates some 500 stores as well as an e-commerce channel, said last week full price sales in the 13 weeks to May 1 fell 1.5 percent compared with the same period two years ago - before the COVID-19 pandemic started to disrupt trading last year. The group’s previous guidance assumed first-quarter sales would tumble 10 percent from the same period in fiscal 2019-20, so they ended up beating this forecast by 75 million pounds. More positive news came from their sales in the three weeks to May 1, which were up 19 percent versus two years ago, partly reflecting the reopening of the majority of stores on April 12 after over three months of lockdowns. “We’re not getting too excited about that because after each of the last lockdowns we did see a spike in demand that petered away after a few weeks,” CEO Simon Wolfson told Reuters.

“What we’re seeing at the moment is pent-up demand that I don’t think is necessarily indicative of what is to come.” Erring on the end of caution, Next did not raise its sales guidance for the rest of the year, which it kept at up 3 percent versus two years ago. They however raised their 2021-22 pretax profit estimate to 720 million pounds (improving their previous outlook by 20 million pounds), practically doubling what they made in the previous comparable period (342 million pounds.) “NEXT PLC’s online strengths have seen it beat expectations time after time through the pandemic. Can it repeat the trick once more, now that it is competing against a reopened High Street?” wonders at Hargreaves Lansdown’s analyst Steve Clayton. “Investors will be looking to see how much trade has been pulled back into the group’s stores and away from the online operations. One thing’s for sure though, pretty much every retailer on the High Street would like to be positioned where NEXT is,” he further added.

Boohoo rides the digital shopping surge

Another UK’s fashion staple, Boohoo (BOOH.L), reported annual results last week as well. The online retailer posted a 37 percent jump in annual core earnings, benefiting from the rise in digital shopping during the COVID-19 pandemic and weathering the negative publicity over its supply chain failings. Boohoo made adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of 173.6 million pounds in the year to Feb. 28, exceeding analysts’ average forecasts and surpassing by almost 10 million pounds what they made in their 2019-2020 financial year. It’s worth recalling that Boohoo faced some labour and supply chains pitfalls last year, when it was confronted with an independent review that found major failings in its supply chain in England after newspaper allegations about working conditions and low pay in factories in the Leicester area. As a result, they pledged to fix the problems with its ‘Agenda for Change’ programme. Six months later, in March, it revealed a major consolidation in its list of British suppliers.