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Higher cotton costs impact on profits at H&M

H&M, the world’s second-largest clothing retailer, has announced that profits fell 18% to 4.3bn kronor (£415.4 million) in its second quarter. Gross profit margin fell from 65.9% a year ago to 61.7%.

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Higher cotton costs impact on profits at H&M

The Swedish retailer said that the rising cost of manufacturing garments, particularly the soaring cost of cotton, had led to a third fall in quarterly earnings.

Net income in the three months to 31 May decreased to 4.26 billion kronor from 5.21 billion kronor a year earlier and  gross margin fell to 61.7% of sales from 65.9% the previous year.

H&M chief executive, Karl-Johan Persson, said: "Increasing interest rates, higher energy prices and austerity measures in many economies have decreased consumer spending power."

The retailer said it planned to open 178 stores in the second half of 2011 and said it regarded China, the US and UK as its biggest markets for expansion this year.

Persson said: “We are optimistic about the future for H&M despite challenging conditions both in the sales markets and in the sourcing markets.”

Last week H&M's owner, the Spanish retail group Inditex, reported an 11% rise in first-quarter sales to €2.96 billion

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