The global fashion retailer H&M has decided to relocate part of its production to Morocco and Egypt, in a move aimed at bringing its supply chains closer to its target markets, following years of financial decline and inventory build-up that cost the company billions of dollars.
According to Bloomberg, the Swedish group’s decision forms part of a broader strategy to shorten the distance between production sites and consumer markets. For years, the company had relied heavily on Asian manufacturing hubs such as China and Bangladesh, a model that extended delivery times and reduced its ability to respond quickly to changing consumer demand.
The same source noted that this shift comes after a prolonged period of financial strain, during which the company accumulated a large stockpile of unsold clothing valued at around $4 billion, alongside a sharp decline in operating profits.
According to the report, this inventory build-up exposed structural weaknesses in H&M’s previous business model, which has struggled to keep pace with rapid changes in the global fashion industry, particularly with the acceleration of digitalization and the rise of more agile competitors.
The company has also lost nearly half of its market value since its peak in 2015, amid intense competition from players such as Inditex, the owner of Zara, as well as low-cost fashion brands like Shein and Primark.
Bloomberg quoted Chief Executive Daniel Ervér as pointing to early signs of improvement, as the company has worked to reduce inventory levels and improve supply chain efficiency. It has succeeded in lowering the inventory-to-sales ratio to its lowest level in a decade, in an effort to restore financial balance.
However, the report added that while these measures have had a positive impact on profit margins, they have yet to translate into sustained sales growth, highlighting the ongoing challenges facing the company in a highly competitive global market.
H&M is now betting on nearshoring production to countries such as Morocco, leveraging its geographical proximity to Europe. This positioning is expected to reduce shipping and distribution times, allowing the company to bring products to market more quickly and respond more effectively to shifting trends in the fast fashion sector.
The new approach is also expected to enhance production flexibility by reducing the number of suppliers and reorganising the supply network, enabling faster decision-making and helping avoid delays—one of the key issues the company has faced in recent years.
Morocco, for its part, has increasingly positioned itself as a key platform in the textile industry. Several major international brands have established operations in the country, including Inditex, which remains one of the most prominent players in Morocco’s textile sector.
