HONG KONG, CHINA – 2021/08/07: People cross the street in front of the Swedish multinational fashion design retail company Hennes & Mauritz, H&M, in Hong Kong. (Photo by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)
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Swedish H&M reported a larger than expected drop in September-November profit, hit by strong consumer confidence and soaring costs that do not fully pass on price tags.
Operating profit in the period, the fourth fiscal of the second largest fashion store in the world, was 821 million crowns ($ 79.7 million) against 6.26 billion in the previous year and the forecast means 3.67 billion in the Refinitiv poll of analysts .
H & M, which has been reported to sell during the same period, said that there are sales from December 1-Jan. 25 – the start of the fiscal first quarter – up 5% in local currency.
“The profit in the fourth quarter compared to the same quarter last year was mainly explained by negative external factors, the loss of operating profit previously contributed by Russia and one-time costs from the cost and efficiency program,” he said in a statement.
The blow from leaving Russia, higher raw materials, freight and energy costs, currency translation effects and restructuring costs totaled around 5 billion crowns, Chief Executive Helena Helmersson said.
“Instead of passing on the full cost to our customers, we chose to strengthen our market position further,” he said.
H&M in September launched a drive to cut costs by 2 billion kroner a year, with savings from layoffs and other measures expected to start from the second half of 2023.
The group signaled in November it would cut about 1,500 jobs and pay about 800 million crown restructuring costs in the fourth quarter for the program.
It announced last year that it was withdrawing from Russia because of the country’s invasion of Ukraine.
H&M proposed a dividend for 2022 of 6.50 crowns per share, unchanged from the previous year, roughly in line with expectations.
($1 = 10.2969 Swedish crowns)