Profits up but margins down at H&M
By Jon Whiteaker - 09:24AM - Wed 29th September 2010
Sales and profit for the year-to-date at fashion retailer H&M have increased according to financial results today.
Total profit at H&M Group for the first nine months of the financial year is up 26 per cent year-on-year, whilst total sales rose seven per cent and sales in local currencies increased 14 per cent.
The third quarter has been particularly strong for sales with an overall increase of 14 per cent and a rise in local currencies of 21 per cent. Profits were also up during the period, rising 23 per cent year-on-year.
One slight worry for the retailer is that gross margins have dropped 60.5 per cent from 61.6 per cent at the same time last year, due to higher costs.
Neil Saunders, Consulting Director at Verdict Research, said: “H&M has been able to offset the erosion in margins by driving volume growth and by keeping a tight grip on operating costs.
“However, it will be more difficult to follow this formula in the future. Input costs are still rising and demand from US and European consumers could soften as they feel the squeeze from government austerity measures. H&M has also said that its pipeline for new stores is not as robust as planned.”
Due to delays in shopping mall construction the overall increase in stores during the year is set to reduce by 20 to 220 but the retailer has reported a successful start for the newly launched transactional website.
Saunders added: “H&M’s fashion forward offer with its competitive prices remains a winning model, but it will need to redouble its efforts to keep up volume growth in a more restrained consumer economy.”