HM Is Sitting On $4.3 Billion Worth Of Unsold Stock

by: Lucy Jones | 6 months ago | News

Clothing stacks inside of one of H&M's garment recycling plants. Image Source.

H&M is sitting on a pile of unsold clothes worth $4.3 billion. In a quarterly report released last Tuesday, the company revealed that its profits are the lowest they’ve been in 16 years. The 62% decline in sales means that the company has been unable to move stock, even after marking it down at clearance sales, leaving them with billions of dollars worth of deadstock (unsold stock).

This news leaves us with one big burning question: what the hell is H&M going to do with $4.3 billion worth of unsold clothes? The fast fashion retailer has been accused of destroying unwanted clothing rather than recycling it in the past. H&M countered these claims, saying that their clothing was actually being used as a fuel replacement in a Swedish power plant. Burning clothes to produce energy is obviously a lot better for the planet than destroying clothes outright, but it is still pretty concerning that H&M has enough excess stock to fuel a power plant in the first place. There is also always the possibility of unsold clothes ending up in landfill. 

According to the New York Times, H&M’s deadstock has grown by 7% in the past year and is now worth just under $35 billion Swedish kronor. Company CEO Karl-Johan Persson said that H&M’s stock levels are so high at the moment because the company is opening 220 new stores and expanding its e-commerce operations. Despite admitting that 2018 is off to a rocky start for H&M, Persson said that he has high hopes for the year ahead.

“The start of the year has been tough,” he said in a statement. “2018 is a transitional year for the H&M group, as we accelerate our transformation so that we can take advantage of the opportunities generated by rapid digitalisation.”

H&M plans to address its unsold stock problem by reducing sale prices even further and focusing on online (rather than physical) store expansion. It has not directly addressed what it will do with the unsold stock from this quarter nor how it will minimise overstock in the future. Without drastic change, it's hard to see how H&M will fix its huge deadstock problem. 

This post was originally published eight months ago. 

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