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What H&M’s $4.3 Billion of Unsold Clothes Says About Consumption

How did the Swedish fast fashion giant end up with a mountain of unsold inventory?

Right now, on H&M’s website, you can buy a black polyester jumpsuit for $8.99, a cropped cotton tank top for $2.99, a Halloween costume for $17.99, and a pack of Christmas ornaments for $1.99. You think that’s cheap? Things are about to get even cheaper. The Swedish fast-fashion giant is in deep shit—financially speaking—with a catastrophic $4.3 billion in unsold inventory (that’s approximately 860,000,000 of its $5 cotton T-shirts), according to the company’s latest quarterly report, released Tuesday. What’s more, profits have  plummeted to a 16-year low, and shares of H&M are the lowest they’ve been since 2005. 

This is indicative of the current state of fast fashion, which churns out as many as 50 to 100 “micro-seasons” per year (H&M releases 16 collections per year, according to The Fashion Law) in comparison to the sensible, two-season fashion cycle of yore. Mass market retailers have struggled to remain afloat amid an increasingly digital-focused climate, where shoppers can purchase clothes within seconds on their smartphones and have them shipped to their door the same day, as is the case with Amazon and, say, Net-a-Porter. On the upside, shopping habits are slowly changing, with consumers showing signs of favoring quality over quantity, according to the New York Times.  

H&M, a company which holds & Other Stories, Cos, and Arket under its umbrella, is a bit of a lone wolf in the arena of “throwaway fashion.” In terms of e-commerce, the retailer has, for the most part, lagged behind its competitors, like ASOS, Uniqlo, and Zara, for instance, which boast sleek interfaces and seamless transactional features. H&M also got off to a rocky start in 2018. On top of an unexpected drop in sales late last year (the worst decline in two decades), the company rang in the new year with a racist controversy involving a t-shirt and an ad. This prompted The Weeknd and G-Eazy—who’ve both enjoyed partnerships with H&M—to cut ties with the company, and in this age, if there’s anything that can halt sales, it’s celebrity backlash. 

H&M found itself entrenched in another controversy earlier this month in which L.A.-based artist Jason “Revok” Williams claimed the company used one of his graffiti murals in an ad without his authorization. H&M fought back, claiming that he couldn’t cry copy infringement because graffiti work is illegal. A boycott ensued, and H&M dropped the campaign and the lawsuit, issuing an apology that stated, “We should have acted differently in our approach to this matter.” 

Controversies aside, H&M CEO Karl-Johan Persson stated that unusual weather patterns also contributed to poor sales. “The high level of clearance sales combined with unusually cold winter weather had a negative impact on the sales of the spring garments,” he said. “The start of the year has been tough.”

In addition to the already-existing 4,700 stores around the world, H&M plans to open 220 more stores this year, which seems counterproductive in that it will inevitably contribute to the already mountainous heap of back stock “spread across thousands of warehouses and stores across the world,” New York Times reporter Elizabeth Paton told NPR. (In other words, there’s not just this massive pile of garments just sitting there.)

But what does H&M do with all of those unsold garments? You may recall a rumor that surfaced last fall in which H&M was accused of incinerating approximately 60 tons of unsold and usable garments since 2013. While it’s been proven that there is, in fact, a power plant in Sweden that turns discarded H&M garments into energy, the company said burning “functional” clothes is “very rare” and that and that unusable products (this may include clothes that contain mold or lead or do not fulfill health and safety standards) are “sent to destruction.” Everything else is donated to charity or recycled. “Products in stores that are not sold at full price are sold at a reduced price through our sales,” the company continued. “As a last resort, we consider external buyers of our overstock.” (If you’ve ever wondered why you see H&M clothes at T.J. Maxx, there you go.)  Whether or not H&M is still mutilating and tossing clothes out onto the street—a disturbing practice that prompted a company spokeswoman to publicly vow that it will “never happen again”—remains unknown.

For now, it seems H&M’s solution to this seemingly insurmountable dilemma is Afound, a soon-to-be launched online and physical marketplace for discounted items (the company calls it a “style- and deal-hunting paradise”). It also plans to slash prices even more, meaning that $4 off-the-shoulder zebra-print dress could soon be yours for next to nothing—a small price to pay for fashion’s shameful excess problem.

Perhaps another—albeit rather obvious-sounding—solution could be to limit the amount of products H&M releases. Look at Gucci or Supreme, two hugely profitable brands that subscribe to a model in which spontaneous drops contribute to almost immediate sell-outs. It’s a delicate balance, particularly for a fast fashion retailer, but imperative in lessening the never-ending emission of waste. Fashion gets a bad rap for being the second-largest polluter in the world after oil; this is a popular statistic that is actually strangely difficult to cite, but is probably true. H&M’s $4.3 billion problem is just one slice of the fashion industry pie, but scarily reflective of where we sit in this cesspool of cheap, disposable crap. 

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