H&M Struggles With Mountain of Unsold Clothes

H&M says it is struggling with shrinking profits and a massive, ever-growing pile of unsold clothes. The fashion retailer, full name Hennes and Mauritz AB, is sitting on a $4.3 billion mountain of unsold inventory that has grown by 7% over the last year as shopping habits change, reports the New York Times, which notes that H&M is so big a business that burning its defective items helps fuel a power plant in its Swedish hometown. The company announced this week that sales were down slightly quarter-on-quarter and there was a massive 62% drop in operating profit in the first quarter, the AP reports.

"The worrying sign again comes from unabated piling-up of inventory," says Bloomberg analyst Chris Chaviaras. CEO Karl-Johan Persson says the high inventory levels are due to the opening of 220 stores on top of the existing 4,700 and an expansion of online offerings, though critics blame poor management, the Times notes. Persson admits the start of the year has been "tough," but says the company is prepared to "take advantage of the opportunities generated by rapid digitalization." The company says the online business expansion—and some price-slashing—should help reduce the pile of unsold clothes. (More retailers stories.)