Fast-fashion giant H&M is currently sitting on $4.3 billion worth of unsold clothing (we’re envisioning a lot of skinny black jeans and button-up tops), according to the company’s latest quarterly report.
The fast fashion giant outlined in the report, released on Tuesday, its increasing dilemma that has grown by 7% over the last year. The New York Times reports that the unsold inventory could be a sign that the company is having a difficult time dealing with increased competition and constantly evolving consumer demands.
What does the company attribute the unsold inventory to? Karl-Johan Persson, H&M CEO, is saying that inventory levels were increased to match the 220 new stores the company is opening. What are critics saying? That perhaps the company isn’t managing its inventory as well as it should — and also that less-than-stellar products are prompting shoppers to go elsewhere.
“The company said operating profit fell 62 percent in the three months through February, sending its shares to their lowest closing price since 2005 on the Stockholm stock exchange,” the Times reports.
Fast-fashion retailers have enjoyed a boom that is potentially beginning to slow as shoppers become simultaneously more quality conscious but also want trendy apparel before it goes out of style — something that can happen in weeks or even days. But the scale of H&M is vast: the company produces so many items each year, that an entire town is partially fueled by burning unsold or defective H&M products.
In the meantime, H&M says it has a plan: slashing prices on the current stock of unsold inventory and slowing expansion — and hopes that online traffic will expand 25 percent this year. Zara and H&M might be the two largest fashion retailers in the world, but they’re facing heavy competition from younger, digitally savvier retailers.
Companies like ASOS and Boohoo have been able to conceptualize and create on-trend clothing quicker than H&M, and they don’t have the brick-and-mortar stores that can be a drag on sales. Fast fashion is getting even faster.