H&M revenue growth slows down due to war in Ukraine

[GENEVA] Hennes & Mauritz (H&M) reported a brisk slowdown in sales growth, becoming one of the first retailers to signal how the war in Ukraine is weighing on consumption.

Sales rose 6 per cent in local currencies in March compared with 23 per cent growth in the 3 months through February, H&M said Thursday (Mar 31).

The war and a resurgence of Covid in China are weighing on the prospects for retail after a recent rebound. H&M has paused sales in Russia, its sixth-biggest market, accounting for about 4 per cent of total revenue. H&M had 227 stores closed as of Wednesday, most of them in Russia, Belarus and Ukraine.

Excluding those 3 countries, revenue rose 11 per cent in March.

Pre-tax profit reached 282 million krona (S$41.2 million) in the 3 months through February, far short of the average analyst estimate of 1.05 billion. The first quarter typically contributes less to profit than the rest of the year as it includes post-Christmas clearance sales.

H&M had a loss in the year-earlier period due to pandemic-related store closures and discounts to clear out inventory after Christmas. H&M's inventory began to pile up in 2016, and the retailer is still struggling to bring down the level.

Inventory edged up to 18.9 per cent of 12-month sales from 18.7 per cent at the end of November. H&M said about a sixth of the stock-in-trade is held to mitigate any supply-chain delays.

The retailer raised its net store closure target to 145 shops this year, up from 120 previously. H&M's contracts allow for a third of its leases to be renegotiated or each year. BLOOMBERG