PARIS — As the wave of disruption from the coronavirus sweeps across the apparel industry, H&M is preparing to temporarily lay off tens of thousands of employees and has scrapped the payment of its annual dividend, the company said on Monday.
The Swedish fast-fashion retailer said store closures, along with “subdued demand” in markets that remain open, are having a significant negative impact on sales in March so far and it is reviewing all operations, including costs.
The group, which owns brands including H&M, & Other Stories and Cos, has taken measures related to buying, investments, rents and staffing, reviewing the situation market by market, it said.
H&M has temporarily closed 3,441 of its 5,062 stores around the world, with the U.K. network shuttering over the past weekend, following on the heels of closures in the U.S. and Germany last week.
“Dialogue about temporary layoffs has been initiated in a number of markets and will be followed by further temporary layoffs in other markets that are impacted by the corona situation,” said H&M.
“Globally, this is likely to affect tens of thousands of employees in all parts of the business, although it is not currently possible to specify the exact number. The company is also reviewing the potential need to terminate employment due to the negative impact of the corona situation on the business,” it added.
Zara owner Inditex, meanwhile, said it will consider temporary layoffs of thousands of workers in Spain if the government extends confinement measures scheduled until April 15. The move could affect some of the Spanish fast-fashion retailer’s 25,000 workers in shops in the country, but not impact the around 6,000 employees at the headquarters, in the north, a spokeswoman said in response to an inquiry.
Online sales remain open in around 50 markets, H&M added.
Stressing the importance of dialogue between governments and the corporate sector, the group added it welcomes support provided by some countries to help ease the cost burden for companies. H&M reports first-quarter sales on April 3.
“We are doing everything in our power in the H&M group to manage the situation related to the coronavirus. My hope is that we will be able to get operations up and running again as soon as possible and welcome back all our customers in all our 74 store markets,” said chief executive officer Helena Helmersson.
“This is an extraordinary situation in which we are forced to make difficult decisions, but with every challenge there are also opportunities and I am convinced that we as a company — once we have made it through this — will continue to stand strong,” she added.
The market has changed drastically since the board originally proposed a dividend of 6.75 Swedish kronor per share, said Stefan Persson, board chairman.
“I am convinced that this is the best decision in this situation in order to further strengthen the company’s already strong financial position and thereby secure our freedom of action going forward,” he said.
The company has reached out to European Union officials to offer help in supplying equipment for health-care workers, with plans to draw on its supply chains to procure supplies.