H&M reports jump in profit, says June sales are seen falling

HENNES & MAURITZ reported second-quarter earnings that beat analysts’ estimates but said sales could fall as much as 6 per cent in June as the war in Ukraine and supply chain snags weigh on the retailer.

Pretax profit at the Swedish low-cost retailer rose by a third to 4.78 billion kronor (S$652 million), the company said on Wednesday (Jun 29). Analysts had expected 3.98 billion kronor. H&M earlier this month reported a 12 per cent sales jump in local currencies.

“Well-received collections have led to strong development, with a further increase in full-price sales and decrease in markdowns,” chief executive officer Helena Helmersson said in a statement.

H&M and rival brick-and-mortar retailers have seen a rebound in sales as consumers refresh wardrobes for work and special events after 2 years spent mostly stuck at home. Still, rising prices for everything from energy to transport and food are stretching shoppers’ budgets and sapping confidence. Soaring costs are also squeezing margins for some retailers.

The war in Ukraine and sporadic lockdowns in parts of China, where H&M has been the subject of a boycott related to its refusal to use cotton from the Xinjiang region, aren’t helping. The company is closing a flagship store in Shanghai, while in Russia it paused sales following the invasion.

In the current quarter, net sales in June are expected to show a decrease of 6 per cent in local currencies from the same month last year, affected by the sales pause in Russia, Belarus and Ukraine, H&M said.

SEE ALSO

H&M closes Shanghai flagship store, hurt by lockdowns and consumer backlash

H&M said it is looking at ways to “prioritise initiatives, redistribute resources and ensure continued good profitability” as a direct consequence of the challenges it faces.

Warnings from analysts that H&M will see a hit to its profitability have contributed to a more than 30 per cent drop in the share price this year. The company’s stated ambition is to strengthen its market position by raising prices less than competitors. BLOOMBERG