Swedish apparel brand H&M has now closed about 20 stores in China, its chief executive officer (CEO) Helena Helmersson said on Wednesday (March 31). Experts predict that this wave of official Chinese Communist Party boycotts will soon pass.
“We want to be a responsible purchaser, whether in China or elsewhere, and we are now building a forward-looking strategy and actively looking at the next steps regarding material sourcing.” Helmerson said during the company’s earnings call on Wednesday.
Reuters reported on Wednesday that H&M posted a pre-tax loss of 1.39 billion Swedish kronor ($159 million) for the December 2020 to February 2021 fiscal quarter, compared with a profit of 2.5 billion Swedish kronor ($287 million) in the same period last year.
Last week, the Communist Youth League, a Communist Party-affiliated organization, publicly attacked H&M’s old statement last year that it had stopped using Xinjiang cotton, which then set off a new wave of boycotts on the Internet in mainland China, with e-commerce companies, taxi companies and mapping apps removing any information about H&M, and some H&M brick-and-mortar stores being taken offline or closed.
China is H&M’s third largest market by sales, accounting for 6 percent of overall revenue.
According to data published on H&M China’s website in February, the H&M Group opened 5,018 stores in 74 markets worldwide and online stores in 52 of those markets by fiscal 2020. By the end of fiscal 2020, H&M had 445 stores in 146 cities in mainland China.
Helmerson said Wednesday that their company remains committed to the Chinese market and is “dedicated to regaining the trust and confidence of our Chinese customers, colleagues and business partners.”
Asked whether the Chinese owners forced H&M to close, she confirmed that 20 H&M stores in China have closed; however, she declined to give details of the reasons or timing of the closures, while she also declined to answer the question of whether H&M’s supply chain in China has been affected.
U.S. media: Boycott wave may be Beijing‘s deliberate framing to kill the chicken and the monkey
The Wall Street Journal reports that the boycott has made H&M, one of the world’s largest apparel retailers, the latest test case for how a major Western brand might respond to government intervention in China (Communist Party of China), where Beijing is now increasingly willing to use civil power to interfere with the behavior of foreign companies.
For many consumer-focused foreign companies, China is their fastest-growing market. But Beijing’s interference with Western companies, or simply calling off foreign companies it feels are not toeing its government line, could be a major frame-up.
In addition to the boycott of H&M last week on the Chinese web, it also reached other foreign brands, such as sports brands Nike and Adidas, which have made similar statements about forced labor in Xinjiang. Only H&M, however, has been subjected to such sweeping deletions online.
Joerg Wuttke, president of the European Union Chamber of Commerce in China, predicted that the wave of boycotts against H&M on China’s domestic web would dissipate.
Companies such as Nike and Adidas have invested in next year’s Winter Olympics in Beijing, he said, and “China [the Communist Party of China] has no interest in making a fool of itself in the eyes of the world.
And Alexander Shapiro, head of strategic business at brand agency PBB Creative, told China Daily that H&M essentially had two options: first, to keep a low profile and hope the boycott would end quietly; second, to take a sales risk and stick to its human rights stance.
Shapiro said H&M could also make a pre-emptive exit from the Chinese market, which could benefit H&M’s sales outside of China if it is seen as unwilling to submit to Beijing.
“The attention (gained by the move) could be more valuable than its China operations.” He said.
H&M is a Swedish Family-controlled company that is publicly traded, but to some extent it can be shielded from investor pressure and can have more room to maneuver than other companies.
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