The Swedish group Hennes & Mauritz (H&M), the second largest clothing retailer after Inditex, saw its results fall sharply last year, weighed down by the greater impact of electricity bills, higher transport costs and the increase in the price of the clothes you buy at your buy suppliers. Net profit fell 67% to 3,566 million kroner (EUR 318 million) in the last financial year (December 1, 2021 to November 30, 2022), with losses of 864 million kronor (EUR 77 million) in the fourth quarter. Results released this Friday weighed on the company’s shares, which fell 7.9% at the Stockholm Stock Exchange’s opening (the decline later leveled off to 5%).
The fast-fashion giant’s sales grew 12% to 223,553 million kroner (19,960 million euros) in an inflationary context, although the company says it hasn’t fully carried over the cost increase, which also erodes profitability. “Rather than pass on all costs, we decided to strengthen our position in the market,” said CEO Helena Helmersson in a statement. Operating profit fell 53% to 7,169 million kroner (640 million euros), with a gross margin of 50.7%.
The end of activities in Russia after the invasion of Ukraine was also reflected in the balance sheet, as was the planned layoff of 1,500 employees. Another point that matters is the fact that H&M buys a higher percentage of its clothes from Asian suppliers than, for example, Inditex, which is currently at the company’s expense due to increased transport costs. The company is trying to bring production closer to Europe to reduce these costs.
The pandemic hit H&M hard and just as it was expected to recover in 2022, war broke out in Ukraine, having a huge impact on transport and energy costs around the world. “External factors that have negatively impacted our purchasing costs are gradually receding and we expect to return to positive data in the second half of 2023,” predicts Helmersson. Purchases from suppliers are already reducing their costs compared to the same period last year, according to the board, who are confident that the cost-cutting program launched in 2022 and targeting annual savings of 2,000 million kroner will be felt as early as the second part of 2023.
The company has announced that sales in December and January rose 5% during the Christmas holidays and sales. In general, however, the company warns that the purchasing conditions of suppliers are still very negative.
The year closed with 4,465 stores worldwide, 336 fewer than 2021. The only brands with a positive business record were Arket (launched in 2017 with own and third-party brands and an in-store cafeteria, which has 25 stores after opening one in 2022) and H&M Home, which already has 31 outlets, four more. Western Europe and America are the main sales markets for the Swedish company.
The average number of employees for the entire group as of November 30, 2022 was 106,522 compared to 107,375 in the previous year.
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