H&M, which sold more than $22 billion in clothing and accessories in its 2023 financial year, aims to reach an operating margin of 10% by the end of 2024. Faced with falling sales, the retailer with around 4,300 global stores is intensifying cost-cutting, prioritising profitability over revenues.
Apparel retailers are facing challenges with unsold inventory, resulting in write-offs and impacting margins. They are reducing sourcing periods to mitigate the risk of obsolescence and adjusting their ordering strategies. The industry was unprepared for the sudden demand slump after the festive season in 2022, leading to stockpile. Retailers are now planning for shorter periods and buying closer to the season. Despite extended discounting, retail sales growth has been negative for like-for-like stores due to a shift in consumer spending towards travel and experiences.
Apparel Retailers: The fashion retail segment has been struggling with a demand slowdown since January this year due to inflationary headwinds. The overall growth slowed down to 6% in both March and April, according to the RAI, indicating the slowest sales expansion in more than 14 months and increasing marginally to 9% in August and September.