H&M reports sharp drop in fourth quarter profit
H&M has seen a sharp drop in fourth quarter profit following the impact of a range of external factors and increased costs not fully passed on to customers.
In the three months to 30 November, operating profit fell to 821 million crowns from 6.26 billion a year earlier, which the retailer said was mainly caused by weaker consumer confidence, higher costs and its exit from Russia.
Meanwhile net sales increased by 10% but were flat in local currencies.
Helena Helmersson, chief executive of H&M, said: “Our decision to wind down the business in Russia, which was an important and profitable market, has had a significant negative impact on our results. .
“The hikes in raw materials and freight costs combined with a historically strong US dollar resulted in extensive cost increases for purchases of goods.
“Rather than passing on the full cost to our customers, we chose to strengthen our market position further. On top of this there were increased energy costs as well as a one-time charge for the cost and efficiency programme that was initiated at the end of the year.”
H&M said trading in its new financial year has started well despite challenging external factors. It said sales from 1 December to 25 January rose by 5% in local currencies.
Helmersson added: “Combined with our investments and efficiency improvements, there are very good prerequisites for 2023 to be a year of increased sales, and improved profitability. Thus, our goal of achieving a double-digit operating margin for full-year 2024 remains in place.”
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