BUSINESS

H&M To Cut Stockpile Of Clothes Worth $4 Billion

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H&M To Cut Stockpile Of Clothes Worth $4 Billion

H&M has a big problem on it hands: A stockpile of unsold clothes worth $4 billion

The Swedish fashion company said Thursday that the value of its global unsold inventory ballooned in the most recent quarter to 36 billion Swedish kronor ($4 billion). That's a 13 percent increase over the previous year, reports CNN.

The mass of unsold clothes, which has grown over a period of years because of weaker-than-expected sales growth, helped drag down profits by 28 percent in the first half of 2018.

"The inventory issue has now developed into a significant problem for the company," said Adam Cochrane, an analyst at Citi.

H&M said it would deploy a variety of strategies, including sales, to gradually reduce the stockpile.

Cochrane said the company would offer discounts in markets where consumers respond to sales — either in store or online. The company may also sell stock to retailers that operate in countries where H&M doesn't have a presence.

While some investors might prefer a more aggressive approach to clearances, Cochrane said the company will want to pursue a balanced approach.

Image credit: CNN