H&M Crazy Shop Is Not As Big As Expected Single Store Sales.

The basis of Morgan and Stanley is that although H&M2006 has been set up worldwide at an annual rate of 15%,

In this way, the sales volume of the group is increased, but the profit of each store is declining.

It even ventured to speculate that H&M will face a sales inflection point, and the group's sales will probably drop by 40% by 2020.

H&M is still very busy recently. He is busy opening up shop, busy participating in Paris art installation exhibition, and offering limited environmental protection series.

But none of this seems to cover up the weakness of its development.

According to the latest report released by the H&M group in the first quarter of 2016 (December 2015 to February 2016), the sales of H&M increased by only 9% (far behind that of the parent group Inditex of rival --Zara in January, 15% in January). The monthly sales growth was also the lowest in nearly three years, and the profit dropped 29% compared with the previous year.

Like UNIQLO, H&M group also attributed the decline in profits to the warm winter climate. The warm winter made everyone buy less sweaters and jackets, resulting in a large increase in inventory. H&M had to increase the intensity of the discount and inventory.

In addition, H&M said that a strong dollar was also an important reason for the decline in its profits. The strength of the US dollar increased the purchasing cost of H&M: H&M accepted sales in different currencies, but settled to suppliers, usually in dollars.

For such an unsatisfactory performance, H&M management quickly claimed that the worst stage was over.

But the market and investment banks do not think so. On the contrary, the bad is just beginning.

In his report, Morgan and Stanley sharply pointed out that the development mode of H&M relying on store expansion to promote sales is not sustainable.

The basis of Morgan and Stanley is that although H&M2006 has increased retail sales by 15% per year in the world, it has increased the sales volume of the group, but the profit of each store has been declining.

It even ventured to speculate that H&M will face a sales inflection point, and the group's sales will probably drop by 40% by 2020.

Open shop! Open shop! Open shop!

H&M has been focusing on store expansion in recent years.

In April 6th, they announced that the 4000th stores in the world were in a shopping mall in New Delhi, India.

(these 4000 stores contain all the H&M group's holdings.

Including H&M, COS, &OtherStories, Cheap Monday and Monki, of course, most of them are H&M flagship brand, H&M accounts for more than 80% of the total group sales.

So far, from 2010 to now, in less than 6 years, the number of H&M's global stores has doubled.

This is not over. In the new fiscal year, H&M Group intends to open 425 new stores, including flagship stores in South Africa, Switzerland, Hungary and India.

Of course, China's market has become a fast fashion, and in fact, it will be one of the largest H&M stores in 2016.

Magnus Olsson, general manager of H&M Greater China, said in an interview in twenty-first Century that despite the increasingly fierce competition in China's fast fashion industry, Chinese consumers still have strong demand for fashion. Fast fashion brands have not yet been saturated in the second tier cities of China. Therefore, North Guangzhou Shenzhen will still be a key city for H&M to open stores this year, and it will also accelerate the pace of development in the three or four tier cities.

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According to the executive's introduction, in the 2015 fiscal year, H&M added 73 new stores to mainland China. As of March 31, 2016, the total number of H&M stores in mainland China has reached 317, becoming the second fastest fashion brand in China.

There are also people who tell you that H&M is likely to introduce more new brands to China, such as &Other Stories.

But what about single store sales and profits?

However, in the mad shop, H&M's single store profit level is declining.

In the last year's research and analysis, "Fashion interview notes" has long been found that although the rapid expansion of H&M has greatly increased brand revenue and sales volume, the average annual sales of H&M single stores are decreasing year by year, in other words, its flat efficiency is also decreasing.

And in its rapidly expanding Chinese market, H&M has shown signs of growth.

The figures shown by Morgan and Stanley show that with the rapid increase in the number of H&M stores in China, sales growth has dropped from a 80% growth rate in 2008 to a low double-digit figure in 2015.

In the latest quarter, H&M's sales growth in China dropped to a record low of 6% (fixed exchange rate).

A shopping center merchants told reporters that H&M is now opening shop in order to open shop, in China, many times even subsidized decoration, is to "open shop to grab ground", the actual sales of new stores are worrying.

Morgan and Stanley bravely conjecture that H&M will face a sales inflection point, and the sales volume of the group will be significantly reduced by 40% by 2020.

Another problem that high-speed expansion brings to H&M is excessive sales and sales promotion under inventory management. This also brings many negative effects to H&M directly.

In the latest quarter, H&M's pre tax profit plunged 29.6% to 33.27 billion Swedish kronor, which was 4 billion 723 million Swedish kronor in the same period last year. As a result of over discount, the gross profit margin of the company ended 2016 in the first quarter of February 29, 2016, also slumped by 320 basis points to 55%, and gross profit increased 2.2% to 22 billion 699 million krona, which was 22 billion 213 million Swedish kronor in the same period last year.

H&M said it was because of the discount caused by climate, resulting in a drop in profits.

But in fact, H&M has always been very reliant on price cuts.

Unlike the low price and low replenishment rates adopted by Zara, the main competitor, H&M has always relied heavily on price reductions (both in terms of product size and price cut) and high replenishment rates. If a product is sold well, H&M will continue to replenish the goods, knowing that the stock will be overstocking and then discounted.

This is also demonstrated by online performance.

By the end of last year, 24.2% of H&M's online sales were on sale, of which 9.3% had been cut by more than 50%, while ZARA had only 3.2% of its products selling at a reduced price, of which 0.2% had cut prices by more than 50%, indicating that H&M was more dependent on discounts to clean up inventory than ZARA.

Electricity providers are too conservative?

Online shopping is already an inevitable trend in the fashion retail market. For the fast fashion of price civilians, the development of online shopping is beyond doubt.

H&M also announced in the latest financial report that by the end of 2016, they will add 11 online sales outlets in the region, which means that H&M will own its own e-commerce business in 34 countries.

H&M has taken the strategy of combining online and offline in China. Since the launch of online stores in 2014, the sales growth of H&M in electricity suppliers far exceeded expectations.

But other fast fashion brands have been stationed in other electronic business platforms to develop multiple online sales channels (Zara and other fast fashion brands have been stationed in Tmall a few years ago). H&M still relies on self built website hm.com to develop online businesses.

Compared with competitors' multi-channel development and new attempt to pick up convenience stores under the joint line, H&M's practice of relying on self built channels to develop online sales is considered "too conservative".

In an interview with twenty-first Century, Magnus is also honest, multi-channel development is the future of fast fashion industry.

One of them, and compared with other countries, Chinese consumers have taken the lead in payment, communication and interaction. But at present, H&M hopes to form a multi-channel sales platform through self built platform and physical store.