Skandia’s actively managed funds have spent the past months selling off most of its stake in Hennes & Mauritz after watching the fashion retailer struggle with weakening sales in its physical stores and intensifying online competition. The Swedish savings and insurance giant says there’s a raft of issues H&M would need to address before it will consider investing again.
“There’s so much they need to do that I don’t think they’ll solve this quickly,” Erik Sjostrom, who oversees more than $3billion (R36.42bn) as a senior portfolio manager at Skandia, said. H&M, whose biggest shareholder is the billionaire Persson family that started the company in 1947, sank more than 30percent last year. This year, the stock is down about 7percent.
The world’s No 2 fashion chain by sales (after Zara-owner Inditex) neede to start prioritising profitability over growth and present a credible plan for tackling online competition, Sjostrom said.
It also needed to cut its dividend, reduce the number of stores in mature markets, and focus on getting its product mix and price levels right, as well as reducing or writing off excess inventory that got in the way of new trends hitting its shelves, he said.
H&M has said it feels confident it can fix its “disappointing” sales history. Management was working on building its online presence, creating new brands, improving its shops and fixing inventory issues with better technology.
H&M’s problems partly stem from its slowness to adapt to a digital age in which consumers increasingly shop online. Although its digital sales are up, H&M still faces stiff competition from multi-brand and freed-delivery platforms like Zalando.