H&M profits fall

H&M

First-quarter sales for Swedish fast fashion retailer, Hennes & Mauritz AB, grew to 43.7 billion kronor, or A$7.17 billion, from 40.3 billion kronor as the company continued to expand with new shops and increased online sales.

Quarterly net profit dropped to 3.3 billion Swedish kronor from 4.7 billion kronor a year earlier.

Chief executive, Karl-Johan Persson, said on Wednesday that profits were affected by “a continued very negative US dollar” and by increased markdowns.

“Profits in this year’s first quarter have been negatively affected by a continued very negative US-dollar effect, which made our purchasing much more expensive, as well as by increased markdowns due to larger volumes of winter garments that remained as a result of the warm autumn,” Persson said.

“The negative dollar effect continues for purchases made for the second quarter 2016, although the negative effect has begun to gradually decrease due to the start of the annualisation of last year’s strong US-dollar exchange rate. Should today’s exchange rates continue, the effect of the US dollar on purchasing costs for the fourth quarter will be neutral or slightly positive compared to the corresponding quarter the previous year.”

In their annual report news release, Persson said they are looking forward to open their first stores in New Zealand, Cyprus and Puerto Rico, “which means that by the end of the year, H&M will be present in 64 markets.”

He said the group, which includes brands such as Cos, Monki, Weekday, & Other Stories and Cheap Monday, plans a net addition of around 425 new stores, most of them in existing markets, for this year, including the launch of its 4000th store this month in the Mall of India in New Delhi.

“Our strong expansion continues, we are gaining market share and we are confident that we can grow at a fast pace, both through stores and online, in existing as well as in new markets, for many years to come. The spring will bring many store openings, for example the opening of flagship stores in South Africa, Switzerland, Hungary and India,” Persson said.

By December, H&M will have extra 11 online markets, meaning the Stockholm-based group will have 34 in all.

Persson said they plan to expand their growth target this year, which is to increase the number of stores by 10 to 15 per cent per year with continued high profitability.

“We will continue to follow developments in the market closely in each country where we are present. For 2016 we see many opportunities, but are also well aware of the challenges that exist. We firmly believe that our customer offering and our investments will lead to increased market share, and will strengthen our position even further during the year.

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