Fashion retailer H&M plans to shutter more than 170 of its brick-and-mortar locations this year through its largest store closure program in at least 10 years, Bloomberg reported Wednesday (Jan. 31).
The company will close 170 stores in 2018, but it will also add a new discount brand called Afound. H&M has also said it would increase its investment in eCommerce and technology to track inventory, but it would still add stores to markets that are still experiencing growth.
The moves comes as the company saw its biggest drop in quarterly sales in its history. As consumers shop online, H&M is seeing less customer traffic in its brick-and-mortar locations. It plans to offer markdowns of up to 2 percent after ending 2017 with excess inventory, and, as a result of these challenges, H&M CEO Karl-Johan Persson retraced a sales growth target of 10 percent to 15 percent for 2018.
H&M previously announced that 2018 would feature fewer brick-and-mortar store openings as it focuses on adapting efforts toward increasingly digital shopping patterns. After years of rapid growth from the fast-fashion retailer, H&M now finds itself somewhat struggling to integrate into the eCommerce landscape.
According to recent news from CNBC, H&M will only open approximately 220 stores in 2018, as opposed to the 388 it built in 2017. That 220 is a net number, however, as H&M will actually be opening 390 stores and shuttering 170.
“The scale of the reduction will surprise some today, and it will leave the bears questioning why H&M still enjoys a ‘growth stock’ rating,” wrote Morgan Stanley analysts Geoff Ruddell and Amy Curry, who categorized H&M as an “underweight.”
H&M will be investing in analytics and technology to make its supply chain more efficient. The fashion chain also announced intentions to begin selling the H&M and H&M home brands on Chinese eCommerce platform Tmall, promising to launch in more retail markets by the end of the fiscal year.