The New York Times: H&M $4.3 Billion in Unsold Clothes

In the digital era, the challenges around offering trendy apparel before it goes out of style have mounted, particularly as growing numbers of shoppers choose to buy from their smartphones and become more quality conscious.

 

In the world of fashion retailing, where shopping is fast moving online and stores try to keep inventories closely matched to sales, even a small stack of unsold clothes can be a bad sign.

What about a $4.3 billion pile of shirts, dresses and accessories? That is the problem facing H&M, the Swedish fashion retailer, which is struggling with a mounting stack of unsold inventory.

On Tuesday, the company said the pile of unsold stock had grown 7 percent in the past year and was now worth nearly 35 billion Swedish kronor.

The scale of the problem illustrates H&M’s vast size — as one of the world’s largest clothing manufacturers, it produces hundreds of millions of items each year.

Analysts have been pressing Karl-Johan Persson, the company’s chief executive, over the issue. Inventory levels were up, Mr. Persson said, because H&M was opening 220 new stores and expanding its e-commerce operations, and so needed to fill the racks.

Critics, however, blamed poor inventory management and underwhelming product offerings, prompting once-loyal shoppers to take their wallets elsewhere.

The company said operating profit fell 62 percent in the three months through February, sending its shares to their lowest closing price since 2005 on the Stockholm stock exchange.

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