H&M profits hit by soaring costs and wary shoppers

By Anna Ringstrom

STOCKHOLM (Reuters) – H&M, the world’s second-largest fashion retailer, launched a 2 billion Swedish krona ($177 million) savings campaign on Thursday after reporting weaker-than-expected profits due to soaring prices. input costs, slowing consumer spending and its exit from Russia.

Pre-tax profit for the June-August period, the Swedish group’s third fiscal quarter, fell to 689 million crowns ($60.9 million) from 6.09 billion a year earlier. Five analysts polled by Refinitiv had on average forecast a profit of 2.98 billion crowns.

The company didn’t give details on where it hoped to make savings, but said the benefits should be felt in the second half of 2023.

Its shares fell about 7% in early trading.

H&M said a 2.1 billion kroner surcharge for shutting down its Russian business, announced in July, only accounted for about half of the drop in profits.

Earlier this month it had posted lower-than-expected sales for the period as shoppers restrained spending amid soaring energy and other living costs, but said demand is slackening. was improved at the end of the quarter.

He said on Thursday that a heat wave in many European markets and supply chain delays were also weighing on sales.

Meanwhile, rising commodity and freight prices, along with a stronger US dollar, have led to substantial increases in the cost of purchasing goods.

“Overall, these factors had a substantial negative impact on earnings in the quarter,” CEO Helena Helmersson said. “We have chosen not to fully offset the increased costs, which is reflected in the gross margin.”

In Europe, where H&M does most of its business, the conflict in Ukraine, record energy prices and high inflation are weighing on consumer confidence, and households are cutting spending as they prepare for more difficult times.

Market leader Inditex, owner of Zara, which has weathered recent headwinds better than H&M, increased sales in its May-July quarter. However, the Spanish group’s growth slowed from August 1 to September 1. 11 period.

H&M said on Thursday that its fall collections had been well received, with sales up 7% year-on-year in local currencies from September 1 to 27 – the start of its fourth fiscal quarter.

($1 = 11.3104 Swedish crowns)

(Reporting by Marie Mannes in Gdansk, Anna Ringstrom in StockholmEditing by Terje Solsvik and Mark Potter)