H&M suffers in third quarter because of expensive dollar | RetailDetail

H&M suffers in third quarter because of expensive dollar

H&M suffers in third quarter because of expensive dollar

Swedish fashion chain H&M may have increased turnover 19 % in the third quarter of its financial year, but the group's profit barely grew because the expensive dollar resulted in higher resource prices.

Increased turnover did not result in higher profits

Hennes & Mauritz's turnover in the 1 June - 31 August period reached 46.024 billion Swedish krona (4.9 billion euro, excluding VAT), up 19 % compared to the same period in 2014. The turnover increase was "only" 11 % in local currency.

 

Profit suffered because of the resource prices: 80 % of H&M's supplies comes from Asia, where the strong dollar is often the currency used for transactions. On average, the dollar soared 24 % higher than the Swedish krona this trimester - compared to the same period last year. Its transport costs also grew.

 

Gross margin at lowest point in 11 years

All this resulted in the lowest gross margin since 2004, a drop from 58.3 % in 2014 to 55.9 % this year. Net profit only reached 5.306 billion krona (560 million euro), barely more than the 5.296 billion krona from last year and well below analysts' expectations.

 

However, H&M is relentless in its expansionist behaviour: the Swedish concern aims to open 400 stores this year, including firsts for India and South Africa. In the upcoming months, it also wants to break through online in Switzerland and Russia, with New Zealand, Cyprus and Puerto Rico up next year.

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