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H&M feeling under the weather as profits fall 30%


H&M's first quarter profits have been hit by the stuff of clothing retailer's nightmares: the weather. Currency headwinds also affected the Swedish group's figures, with pre-tax profit at $410m for the three months to February, down from $580m in the same period the previous year.

H&M has been struggling with the stronger US dollar because it's the currency most frequently used to pay its suppliers but is itself paid in currencies around the world, usually cheaper.

The mild winter also affected seasonal stock, forcing the fashion giant to discount.

"Profits in this year's first quarter have been negatively affected by a continued very negative US-dollar effect which made our purchasing much mor expensive, as well as by increased markdowns due to larger volumes of winter garments that remained as a result of the warm autumn," said CEO Karl-Johan Persson.

These figures are not stopping the group's intent to expand however. H&M plans to open 425 net new outlets in the current financial year and move into New Zealand, Cyprus and Puerto Rico for the first time. Its 4,000th store will open later this month, in India.

H&M has long enjoyed a profitability edge over its bigger rival Inditex by sourcing mostly in low-cost Asia rather than closer to home in Europe, but has seen that advantage eroded by the rise in the dollar, in which most Asian factories are paid.

As Reuters reported, by contrast Zara owner Inditex, the world's biggest clothing retailer, saw sales rise 15% at constant exchange rates in the first five weeks of its financial year that started in February.

Published on Wednesday 06 April by Veebs Sabharwal

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