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H&M profits held back by promotions and expansion

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Large scale promotional activity and international expansion resulted in fashion retailer H&M’s profits falling by 15.5 per cent year-on-year during its third quarter, it was announced today.

In the three months to August 31st 2011 group profits after tax were SEK 3.59 billion (£338 million), compared to SEK 4.24 billion in the same period in 2010, showing just how margins have been affected to by heavy discounting on the high street.

The company, which has recently opened up its first operation in Singapore and earlier this month detailed plans to expand to Bulgaria in 2012, also revealed today that 2011 will result in the opening of a net 265 H&M stores – 15 more than it had originally planned.

Group sales including VAT increased by five per cent in local currencies in the third quarter, but were down by three per cent on a like-for-like basis. Converted into SEK, sales excluding VAT amounted to SEK 26.9 billion.

Profit after tax for the nine-month period to the end of August was SEK 10.46 billion, down almost SEK three billion year-on-year.

Commenting on today’s results, CEO of the retailer Karl-Johan Persson said he remains confident in the future success of the company.

“H&M continues to gain market share in a challenging environment for the fashion retail industry - this shows H&M’s strong market position and we see it as a proof that customers appreciate our work on the customer offering,” he explained.

“We have great respect for the current economic climate. In this situation, it is extra important to have a long-term perspective and to always make sure that we give customers the best combination of fashion and quality for their money in every market.

“We have a strong business concept, a strong financial position and we are continuing to grow with high profitability.”

Published on Thursday 29 September by Editorial Assistant

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