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H&M confident of rebound after pandemic-damaged first quarter

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Swedish fashion retailer Hennes & Mauritz AB is investing in digitization after emerging from the pandemic a bit worse for wear.

H&M Group, which owns a suite of other brands including Arket, Cos, & Other Stories, and Weekday, has announced it is scaling back capital expenditure in the coming year, while investing a larger share in digitization and sustainability.

CEO Helena Helmersson said on Thursday that the retailer was confident it would come out of the COVID-19 pandemic stronger with the new investment.

The company began investing in the omnichannel and online space before the pandemic, but it now intends to intensify its efforts to create more efficiency between sales channels and supply chain. The company cited the changed demand in the digital space and a reduced need for in-person stores to back its investment in technology. It believes better product assortment will lead to more full-price sales.

Shutdowns still hurting

Despite many countries slowly rolling back pandemic restrictions, H&M still reported a 21% decrease in net sales for the first quarter of 2021 with 1,800 or 36% of its stores still shut.

As a result, H&M, cash-strapped, has had to take out a short-term credit facility and to cancel its 2021 dividends.

H&M has been growing its sustainable offerings, which might increase net sales in the coming quarter. The group launched Afound, an online marketplace for unsold, out of season clothes, and has bought a majority shareholding in Sellpy, a secondhand-clothing marketplace. It also noted it would try to have all of its new materials come from recycled or sustainable sources by 2030.

Speaking ahead of the firm’s AGM, Helmersson made no mention of China, where sales were dented after the firm faced a boycott—arising from a statement it made, and later removed, over human rights in the contentious region of Xinjiang. China made up about 5% of H&M’s sales in 2020 and is the fashion retailer’s fourth biggest market after Germany, the U.S., and the U.K.

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This story was originally featured on Fortune.com