Mild winter puts pinch on Swedish H&M profits

Swedish clothing giant H&M saw its profits shrink after a mild winter meant shoppers did not hit the stores in their usual droves to snap up warm outfits.

Mild winter puts pinch on Swedish H&M profits
The Swedish winter 'heatwave'. Photo: Anders Wiklund/TT

The retailer posted first quarter profits down almost 30 percent on a strong dollar and mild weather hitting its winter collection.

The Stockholm-based fashion firm said December through February profits came in at 2.54 billion kronor ($310 million), down from 3.61 billion a year earlier albeit slightly ahead of analysts' forecasts.

Sales were up 8.5 percent year-on-year or nine percent in local currency terms at 43.7 billion kronor compared with a 15 percent rise in the first quarter of the previous year.

The results “reflect more expensive supply given the (strong) dollar and increased discounting due to high volume of unsold merchandise in winter collections following a mild winter”, CEO Karl-Johan Persson said.

H&M was not the only business to be affected by the relatively mild winter, with one Nordic snow car race almost being cancelled in February due to a lack of the white stuff.

And with a sizeable proportion of production costs linked to the dollar the currency effect is likely to weigh on second-quarter results before fading away from the third quarter on, H&M predicted.

The chain is to continue its recent international expansion by taking its global store base count past 4,000 this month – double 2010 – by opening a store in India.

Further expansion is planned in the months ahead in South Africa, Switzerland and Hungary.