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H&M admits sales 'below plan' as profits dip

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H&M admits sales 'below plan' as profits dip
This year has brought bad news for the Swedish powerhouse. Photo: Fredrik Sandberg/TT
11:38 CEST+02:00
Swedish fashion giant Hennes and Mauritz said on Wednesday that an unusually cool European spring had kept shoppers away and depressed profits in the three months between March and May, though the damage was not as bad as analysts had feared.

H&M reported a pre-tax profit of seven billion kronor ($846 million) for the period, slightly better than an expected profit of 6.97 billion kronor ($841 million) which was previously predicted by analysts.

In the corresponding period last year however they made a profit of 8.45 billion ($1.01 billion) kronor.

Net earnings fell 17 percent to 5.36 billion kronor ($648 million) in the period, the second quarter of the company's financial year. A strong dollar added a layer to its problems, which also included low sales prices and high investment costs.

“The sales increase in March and April was significantly below our plan. These two months were negatively affected by cold spring weather in many of our markets,” H&M chief executive Karl Johan Persson said in a statement.

This mostly affected big European markets Germany, Britain and France, but the month of May had been much more promising, Persson added.

“It has been a challenging half-year for fashion retail in many markets,” he said.

"There are a number of things we could have done better, but we have corrected them and see a big potential in the continued expansion of both new physical stores and e-commerce markets. We are just at the beginning of our expansion."

During the fiscal year H&M expects to open 425 new stories including branches in three new countries: Puerto Rico, New Zealand and Cyprus.

Expressed in local currencies around the world, H&M group sales rose by five percent in the second quarter this year, but only two percent once they were converted into Swedish kronor, the company's reporting currency.

The retailer's operating margin slipped to 14.8 percent from 18.2 percent in the same period a year earlier.

In reaction to the report, H&M shares dropped on the Stockholm stock market, declining by 0.8 percent.

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