SHARE
COPY LINK

FINANCIAL

H&M stock dips on profits fall

Swedish retailer Hennes & Mauritz on Thursday reported a fall in fourth quarter profits on the back of rising cotton prices and the weak euro.

H&M stock dips on profits fall

Full year figures showed a climb of 14 percent in net profit however and the chain announced that it planned to open 250 new stores this year, after opening 218 in 2010.

From December 2009 to November 2010, the company posted a net profit of 18.7 billion kronor ($2.89 billion), up from 16.4 billion kronor a year earlier.

The profit was boosted by a 7.0 percent increase in sales during the year to a total to 108.5 billion krona.

“We are optimistic about the future and we plan to increase sales in comparable units in 2011,” H&M CEO Karl-Johan Persson said, calling 2010, “a very good year.”

But the company’s fourth quarter earnings missed expectations, with a net profit falling 11 percent compared to the same period a year earlier, to 5.5 billion kronor. Analysts surveyed by Dow Jones newswires expected a net profit of 5.9 billion kronor.

The main figure was dragged down by the strength of the Swedish krona and a hike in raw material prices such as cotton.

“Raw material prices have increased; cotton prices for example almost doubled in 2010,” Persson said.

“Naturally, H&M has to adapt to changing conditions but always in a way that is in accordance with our business concept … and in that way increase opportunities for us to continue to increase market shares,” he added.

For Societe Generale analyst Anne Critchlow, the group does not seem willing to pass higher costs for raw materials onto customers with clothing price hikes, which could have consequences for the company’s finances.

“The problem of increasing prices for raw materials will not disappear in the next six or 12 months,” she told Dow Jones newswires.

Sales for the September-November period were up 6.0 percent to 29.7 billion, while analysts expected an increase in sales of 8.0 percent.

The disappointing fourth quarter results sent H&M shares tumbling 6.03 percent to 214.90 kronor in late morning trading on the Stockholm stock exchange, which was down just 0.15 percent.

H&M was founded in Västerås in central Sweden in 1947. The cheap-and-chic

fashion company had 2,206 stores and 59,440 employees worldwide at the end of

2010.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

H&M

H&M competitor to sponsor Sweden’s Olympic team

Six months after establishing itself in Stockholm, Japanese clothing brand Uniqlo has announced it will sponsor Sweden’s athletes at the 2020 Olympics.

H&M competitor to sponsor Sweden's Olympic team
Anna Hasselborg of Sweden's curling team tries out new kit supplied for the country's athletes by Uniqlo. Photo: Henrik Montgomery/TT

The clothing chain, one of the world’s fastest-growing retail companies, is also set to open more stores in the Scandinavian country.

“Swedes are so sophisticated and warm-hearted,” Uniqlo Europe CEO Taku Morikawa said, stressing how welcome his company has been made to feel.

Morikawa was in Sweden to present the partnership between Uniqlo and the Swedish Olympic Committee at an event at Uniqlo’s store on Hamngatan in Stockholm.

Sweden’s athletes wore teamwear supplied by H&M at the last two Olympic Games.

The Stockholm store, Uniqlo’s first in the Nordic region, opened its doors in August 2018. An expansion is now planned on the Swedish market, although Morikawa declined to reveal where.

“We definitely have plans to open more stores here,” he said.

A store will also open in Danish capital Copenhagen in the coming spring as Uniqlo’s holding company Fast Retailing continues its global expansion.

Sales figures in Sweden’s clothing retail sector have seen a downward trend in recent years, with an exception in 2015.

H&M is usually cited as one of Uniqlo’s main competitors.

The impact of a new player on an already-competitive market is difficult to predict, according to the Swedish Trade Federation (Svensk Handel).

“Locally, competition is sharpened, but competition is already fierce. I would be inclined to say that this type of partly new concept store can, instead, help to revitalise the physical retail sector for clothing,” the association’s head economist Johan Davidson said.  

READ ALSO: H&M profit down sharply despite rise in online sales

SHOW COMMENTS