Business

H&M posts first-quarter profit, Russia tarnishes outlook

FILE PHOTO: File photo shows a woman reflected next to the logo of H&M fashion retailer at the newly opened Mall of Berlin shopping center in Berlin
FILE PHOTO: A woman is reflected next to the logo of fashion retailer H&M at the newly opened Mall of Berlin shopping center in Berlin, in this September 25, 2014 file photo. REUTERS/Thomas Peter

March 30, 2022

By Anna Ringstrom

STOCKHOLM (Reuters) – Swedish company H&M is expected to return to profitability in the December-February quarter as the impact of the pandemic eases, although the closure of its Russian stores and the economic fallout from the war in Ukraine make the company’s prospects more uncertain have made.

Analysts polled by Refinitiv, on average, expect the world’s second-biggest fashion retailer to report first-quarter pre-tax profit of 1.04 billion kroner ($112.2 million) on Thursday.

H&M has reported that sales are up 23% year over year but are down 11% from two years before the pandemic.

In the same period last year, when almost half of the stores closed due to the second wave of the pandemic, H&M made a loss of 1.39 billion kroner. Two years ago it made a profit of 2.50 billion crowns.

Along with many other companies responding to the Russian invasion of Ukraine at the end of February, H&M announced on March 2 that it would temporarily close its stores in Russia, expressing concern about “tragic developments in Ukraine”.

Some companies, like the Carlsberg brewery, have decided to leave Russia permanently, while the Kremlin has threatened to seize assets from companies that pull out.

Russia was H&M’s sixth-largest market, accounting for 4% of sales in the fourth quarter of 2021. While the group is reducing its overall store count, it increased its store count in Russia to 170 at the end of November.

Analysts recently lowered full-year earnings estimates for H&M.

“For H&M, we could see further downside risk to estimates if H&M decides to permanently withdraw from Russia/Ukraine due to the conflict there, or this leads to further upward pressure on inflation and commodity prices,” RBC analysts said in a statement.

H&M’s halt to sales in Russia follows a sharp fall in demand in China last year over concerns the group raised about workers’ rights in the cotton province of Xinjiang. China accounted for around 4% of H&M’s sales.

Just in January, H&M announced a goal of doubling sales by 2030 and achieving an operating margin of 10% by 2024. Last year it reached 7.7%.

Competitor and market leader Inditex, owner of Zara, grew sales by 33% year-on-year in the six weeks ending February 1, and by 21% compared to the same period in 2019.

H&M shares are down 18% so far this year, while the European retail index is down 22% and Inditex is down 26%.

($1 = 9.2720 Swedish Krona)

(Reporting by Anna Ringstrom; Editing by Elaine Hardcastle)

https://www.oann.com/hm-seen-posting-first-quarter-profit-russia-clouds-outlook/?utm_source=rss&utm_medium=rss&utm_campaign=hm-seen-posting-first-quarter-profit-russia-clouds-outlook H&M posts first-quarter profit, Russia tarnishes outlook

DUSTIN JONES

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