The closure of its Russian operations, increased raw material and freight costs, the strong dollar and weak sales in many of its main markets all negatively impacted H&M Group’s profitability in the third quarter.
For the three months ended August 31, the Swedish fast fashion retailer reported operating profit of SEK 902 million, or US$79.6 million at current exchange rates, compared to SEK 6.27 billion, or US$553 million in the same period last year.
Net income was 531 million Swedish kronor or $46.8 million compared to 4.69 billion or $413.7 million a year ago.
“The third quarter was largely impacted by our decision to halt sales and then discontinue operations in Russia,” said Chief Executive Officer Helena Helmersson. “This has had a significant impact on our revenue and profitability, which explains half of the decline in earnings compared to the third quarter of last year.”
She continued, “Increased commodity and freight prices, as well as a stronger US dollar, resulted in significant increases in the cost of purchasing goods. We have chosen not to fully offset the increased costs,” she said, which is affecting margins.
H&M’s net sales during this period totaled 57.45 billion Swedish kronor, or 5.97 billion US dollars at the current exchange rate. This represents an increase of 3 percent over the previous year in reported figures, but a decrease of 4 percent in local currencies.
For the nine-month period, H&M’s net income fell 30.7 percent to 4.43 billion Swedish kronor, or $390.7 million, despite a 13.3 percent increase in reported sales to 161.12 billion Swedish kronor, or 14, $21 billion.
The retailer, which operates Arket, Cos, Monki, &Other Stores and Weekday in addition to its core H&M stores, found that its fall collections were well received and that sales were up 7 per cent year-on-year over the period September 1-27 are. year-on-year in local currencies. This is “an important proof that the H&M group is growing even when the purchasing power of customers is decreasing,” says Helmersson.
https://wwd.com/business-news/financial/hampm-q3-russia-financial-profits-1235362919/ H&M profits hit by Russia shutdown, higher costs in Q3 – WWD