H&M is on a Mission to Make Customers Pay Full Price

Prepare for fewer clearance racks at H&M.

In a recent interview with Business Insider, Martino Pessina, H&M’s president of North American operations, insisted that H&M US already has scaled back on — and will continue scaling back on — heavy discounting this year in its US locations.

“It is not in line with our business idea,” Pessina said. “Deals kill creativity. It’s a shortcut you do and it’s great, and next year you have to do it even bigger, and then all of a sudden, all you do is deal planning.”

Pessina likened these deals to a sugar addiction, and while it will be hard for customers to kick it, H&M is adamant it will scale back to preserve profit margins and rebuild its brand image.

Cutting back on inventory

Leftover inventory is most vulnerable to discounting, one of the main problems that H&M grappled with in 2018.

In March 2018, the group announced that it had accumulated a mountain of $4.3 billion worth of inventory.

At the time, H&M CEO Karl-Johan Persson said in a note to investorsthat the retailer had weak sales in the fourth quarter and, therefore, that leftover stock had “resulted in the need for substantial clearance sales in the first quarter.”

A spokesperson told Business Insider in April that this pile consisted mostly of new spring and summer items, sales of which had been delayed because of unseasonably cold weather. The rest was “season-less garments,” which can be sold year-round, the spokesperson said.

“Every snapshot of the inventory contains a lot of new products that are on their way on ships, and in our distribution and replenishment centers. Just a small part is actually in the physical stores,” they said.

But analysts said it was also down to H&M’s fashion misses and its supply chain, which is relatively sluggish compared to online rivals such as ASOS and Boohoo.

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