Sweden’s H&M reported on Friday a much larger than expected drop in September-November profit, hit by weak consumer confidence and soaring costs that it did not fully pass on to price tags.
Operating profit in the period, the world’s second-biggest fashion retailer’s fiscal fourth quarter, was 821 million crowns (€73.3 million), compared with 6.26 billion a year earlier and a mean forecast of 3.67 billion in a Refinitiv poll of analysts.
H&M, which had already reported that sales in the quarter were flat, said on Friday that sales during December 1st-January 25th – the start of its fiscal first quarter – were up 5 per cent in local currencies.
“The lower profit in the fourth quarter when compared with the same quarter in the previous year is mainly explained by the negative external factors, loss of the operating profit previously contributed by Russia and the one-time cost of the cost-and-efficiency programme,” it said in a statement.
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The hit from quitting Russia, higher raw material, freight and energy costs, currency translation effects and the restructuring charge totalled about 5 billion crowns, chief executive Helena Helmersson said.
“Rather than passing on the full cost to our customers, we chose to strengthen our market position further,” she said.
H&M in September launched a drive to cut costs by 2 billion crowns annually, with savings from lay-offs and other measures expected to start showing from the second half of 2023.
The group flagged in November it would cut about 1,500 jobs and book a roughly 800 million crown restructuring charge in the fourth quarter for the programme.
It announced last year it was exiting Russia due to the country’s invasion of Ukraine.
H&M proposed a dividend for 2022 of 6.50 crowns per share, unchanged from the year before, roughly matching expectations.
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