H&M reaffirms commitment to China amid controversy over Xinjiang forced labour
- Chinese social-media users have been calling to boycott Swedish fashion brand H&M and other retailers after the Communist Youth League and the People’s Liberation Army blasted the company last week for a previous statement about concerns about forced labour in Xinjiang
Hennes & Mauritz AB, the Swedish clothing retailer at the forefront of a Chinese social-media backlash, said it remains committed to China in an attempt to smooth over the controversy.
Chinese social-media users have been calling to boycott H&M and other retailers after the Communist Youth League and the People’s Liberation Army blasted the company last week for a previous statement about concerns about forced labor in Xinjiang. H&M signaled Wednesday that ethical purchasing is still a priority, without mentioning Xinjiang.
“We want to be a responsible buyer, in China and elsewhere,” the company said Wednesday as it reported first-quarter results. “Together with all relevant stakeholders, we want to collaborate to be part of the solution and jointly build a more sustainable fashion industry.”
Global brands are facing a dilemma over whether to embrace cotton from the Xinjiang region or risk being boycotted in the world’s second-biggest economy. China has become H&M’s third-largest market and was the source of more than $1 billion in revenue last year. The company has about 500 stores on the mainland, and landlords of at least six shops closed H&M shops given the sensitivities. H&M said it’s been operating in the market for 30 years.
H&M swung to a pretax loss of 1.39 billion kronor ($160 million) due to pandemic-related store closures and discounts to clear out inventory after Christmas. That was better than analysts expected, though it’s the second time H&M reports a quarterly loss since 2000, according to Morgan Stanley analyst Geoff Ruddell.
The stock fell 1.2% as of 9:17 a.m. in Stockholm, reducing its gain this year to 18%.
The Swedish retailer forecast a strong recovery in the rest of the year. In January, Chief Executive Officer Helena Helmersson said the company was still in “crisis mode.” The first quarter typically contributes less to profit than the rest of the year as it includes post-Christmas clearance sales.
Sales surged 55% in March, the first month of H&M’s second quarter, though that’s because of the easy comparison with last year, when worldwide lockdowns started. Revenue was about 12% lower than the March 2019 level, according to analysts at Jefferies.
Still, inventory remains a perennial issue, rising 10% in constant currencies and reaching almost 22% of 12-month revenue, double the level at Zara owner Inditex SA.
H&M said it may pay a dividend in the autumn though it won’t propose one yet at its annual shareholder meeting in May.