HONG KONG, CHINA – 2021/08/07: Pedestrians cross the road in front of the Swedish multinational clothing design retail company Hennes & Mauritz, H&M, store in Hong Kong. (Photo by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)
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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 didn’t fully pass on to cost tags.
Operating profit within the period, the world’s second-biggest fashion retailer’s fiscal fourth quarter, was 821 million crowns ($79.7 million) against 6.26 billion a 12 months earlier and a mean forecast of three.67 billion in a Refinitiv poll of analysts.
H&M, which had already reported that sales within the quarter were flat, said on Friday that sales from Dec. 1-Jan. 25 – the beginning of its fiscal first quarter – were up 5% in local currencies.
“The lower profit within the fourth quarter in comparison with the identical quarter within the previous 12 months is especially explained by the negative external aspects, lack of the operating profit previously contributed by Russia and the one-time cost of the associated fee and efficiency programme,” it said in a press release.
The hit from quitting Russia, higher raw material, freight and energy costs, currency translation effects and the restructuring charge totalled around 5 billion crowns, Chief Executive Helena Helmersson said.
“Fairly than passing on the total cost to our customers, we selected to strengthen our market position further,” she said.
H&M in September launched a drive to chop costs by 2 billion crowns annually, with savings from layoffs and other measures expected to begin showing from the second half of 2023.
The group flagged in November it might cut around 1,500 jobs and book a roughly 800 million crown restructuring charge within the fourth quarter for the programme.
It announced last 12 months it was exiting Russia as a result of the country’s invasion of Ukraine.
H&M proposed a dividend for 2022 of 6.50 crowns per share, unchanged from the 12 months before, roughly matching expectations.
($1 = 10.2969 Swedish crowns)