Hennes & Mauritz (H&M) expects a net decrease of about 250 stores in 2021, as the Swedish retailer faces growing pressure to sell online. It highlighted that rapid changes in customer behavior have been further accelerated by the Covid-19 pandemic. Therefore, it is stepping up the pace of its transformation through digital investments, the optimization of the store portfolio and increasingly integrated sales channels.

The company noted that each year about a quarter of its stores have the right to renegotiate or exit leases. Next year, it plans to close 350 stores, out of more than 5,000 locations in 74 markets, and to open 100 new ones. H&M also stressed that it is enjoying strong and profitable online growth.

In the third quarter, the company returned to being profitable, with a net profit of 1.821 billion Swedish Krona (€173.8m-$204.1m), albeit down from SEK 3.859 billion a year earlier. The bottom line benefited from more full-price sales than expected and “strict” cost control. For the first nine months of the year, the company was still loss-making, with a net loss of SEK 1.242 billion (€118.5m-$139.2m).

Third-quarter sales dropped to SEK 50.870 billion (€4,854.5m-$5,700.6m) from SEK 62.572 billion the previous year. In local currencies, net sales decreased by 16 percent in the quarter, affected by the pandemic. At the beginning of the quarter approximately, 900 of H&M’s stores were temporarily closed due to Covid-19 related lockdowns. At the end of the quarter just over 200 units were still closed.

In September, sales decreased by 5 percent year-on-year in local currencies. Currently, 166 stores, representing 3 percent of the total fleet, are still closed and a large number of stores face local restrictions and limited opening hours.

Helena Helmersson, the company’s chief executive, said that demand for good value and sustainable products is expected to grow in the wake of the pandemic. “Through our work to become circular and climate positive we are increasing the share of sustainable and renewable materials and we are developing new revenue streams,” she added.