- H&M cuts 1,500 jobs as part of cost-cutting campaign
- The company faces fierce competition and rising costs
- Fourth quarter book restructuring charge of $75.8 million
COPENHAGEN, Nov 30 (Reuters) – Swedish fashion giant H&M (HMb.ST) on Wednesday became the first major European retailer to start laying off staff in response to the cost of living crisis despite a still labor market tense, as he tries to save 2 billion Swedish crowns ($190 million) a year.
The world’s second-largest fashion retailer’s decision to cut mainly back-office staff comes amid soaring inflation and soaring war-related costs in Ukraine, which have pushed businesses to Europe and the United States to save money.
The cuts made by H&M, which employs around 155,000 people, are part of a plan presented in September to save 2 billion Swedish crowns a year.
It’s “symptomatic of the issues facing the fashion retail sector,” Susannah Streeter, senior analyst at Hargreaves Lansdown, said in a note.
“Keeping lights and heating on in huge stores is becoming increasingly unaffordable with such volatile energy prices,” she added.
In September, H&M posted quarterly sales well below expectations as consumers tightened their belts, underscoring its struggle to compete with its biggest rival owned by Inditex (ITX.MC), Zara.
Unlike H&M, Inditex reported quarterly sales growth in September and said it planned to raise prices to offset soaring costs.
H&M also faces fierce competition from cheaper competitors and online-only brands. British fashion retailer Primark has announced plans to create 1,800 jobs in Spain and Britain as it expands.
“Shoppers are showing signs of slumping and bargain hunting, so the pressure is on H&M to compete with chains seen as offering greater value, from Primark on the high streets to Boohoo and Shein online,” Streeter said. of Hargreaves Lansdown.
H&M said its savings would start to kick in from the second half of next year, while it will take on a restructuring charge of 800 million Swedish crowns in the fourth quarter.
“We are in a big transition and the whole retail sector is facing many challenges,” H&M head of investor relations Nils Vinge told Reuters, pointing to the headwinds of the pandemic. , the war in Ukraine and rising input, freight and energy costs.
“It’s very clear that when consumers have paid for their food…energy, gas, etc., there’s less to spend. So what’s evident is that the demand for value for money increases” .
The lion’s share of the job cuts was related to administrative and overhead costs and would be carried out in Sweden, Vinge said.
Shares of H&M, which have fallen by around a third since the start of the year, rose 0.7% at 11.30 GMT, underperforming a 1.2% increase against the benchmark of Stockholm (.OMXS30).
Also on Wednesday, US food delivery service DoorDash Inc (DASH.N) said it was cutting about 1,250 jobs in a bid to rein in spending.
($1 = 10.5331 Swedish kronor)
Reporting by Stine Jacobsen, additional reporting by Terje Solsvik in Oslo, editing by Arun Koyyur and Elaine Hardcastle
Our standards: The Thomson Reuters Trust Principles.