H&M is finally digging itself out from under a vast pile of unsold clothes

H&M is celebrating.
H&M is celebrating.
Image: Reuters/Maxim Shemetov
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For much of 2018, H&M had a big problem: a humongous pile of unsold clothes, totaling more than $4 billion in inventory at one point. Already burdened with too many brick-and-mortar stores at a time when its customers are doing more of their shopping online, the retailer suddenly seemed unable to make fashion that anyone wanted to buy.

H&M has recently made some progress in solving the problem, but it still surprised the market with a 9% jump in its quarterly sales, suggesting a turnaround could be underway. In its announcement today (Sept. 17) of its quarterly results, H&M also noted that it increased market share in several regions.

The company has been investing in efforts to fix its issues, such as working to better integrate its digital business with its physical stores, a number of which it has been closing to trim down its size. It also has put in a new logistics system, in an effort to speed up its operations with a faster, more efficient supply chain.

Though it was one of the pioneers of fast fashion, H&M isn’t as fast as some of its competitors now, and wasn’t keeping up with the demands of shoppers, who expect new, on-trend clothes available in stores and online, faster and cheaper than ever. It has needed to get faster to be able to react quicker to what customers are—and aren’t—buying, to help it avoid getting stuck with another multibillion-dollar pile of unsold inventory.

The strong sales growth came as a big surprise to many analysts. H&M shares, which have lost almost two-thirds of their value since 2015, surged their most in 16 years today, according to Bloomberg (paywall). Speculation that Stefan Persson, H&M’s chairman, is considering taking the company private after he went on a spree buying up H&M stock could also have helped with the stock bump.