Rising Dollar Dampens H&M Q4 Profits

In Reports, Industry Experts, What's New by Jeff Prine

HM spring dollarStockholm—H&M reported today that its fourth quarter profit was hit by an increasingly strong dollar as well as milder fall temperatures in North America and Europe. The retail giant also revealed it would be opening 425 stores this year, mostly in China and the United States.

For the three months ended Nov. 30, H&M posted an 11% decline in net profit to 5.53 billion Swedish kronor (about $649.3 million) from 6.22 billion kroner a year earlier.

Sales, excluding value added tax, amounted to 48.69 billion kroner, up from 42.64 billion kroner last year.

‘Uncertain Market’

Gross margin slipped to 57.5% from 60.4%, mainly because of the stronger dollar. H&M sources about 80% of its apparel in Asia where it pays in dollars.

H&M said it expected sales in January to increase 7% in local currencies from a year ago, resulting in a slowdown from 9% growth in the September to November period.

H&M said discounts on winter merchandise would pull down its gross margin by 1 to 2 percentage points in the first quarter and that it expected the strong dollar would have the same impact on the period as in its fourth quarter, but then lessen.

According to CEO Karl-Johan Persson, H&M plans to open the 425 new stores, about 80 of them in China.

“It’s still an uncertain market,” he said.“Consumption is down and it affects us, too, but the long-term picture hasn’t changed.”

H&M also plans to offer e-commerce in nine more markets such as Japan and Greece in addition to the 23 where it already has online operations.

 

 

 

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