H&M second quarter earnings decline

h&mH&M’s second quarter pretax profit fell to SEK 7 billion, negatively affected mostly by higher purchasing costs due to the strengthened US dollar and by increased markdowns.

Group sales including value-added tax increased by seven per cent in local currencies during the first six months of the financial year for the Swedish fast fashion giant. Converted into SEK, sales including value-added tax increased by five per cent to SEK 1.9 billion.

“Profits in the second quarter have been affected by a continued negative US dollar effect, but also by increased markdowns and the costs of our long-term investments. The fact that the sales increase in the quarter was below plan, naturally also had an impact on profits,” said Karl-Johan Persson, CEO, H&M.

Persson said sales in May were much better with an increase of nine percent, or 11 per cent when adjusted for calendar effects.

“It has been a challenging half-year for fashion retail in many markets, but we have great confidence going forward and are continuing to develop our offering further within all our brands,” Persson said.

Persson said the H&M group plans a net addition of around 425 new stores for the 2015/2016 financial year. New markets for 2016 are Puerto Rico, which has opened this June, and New Zealand and Cyprus which will open in autumn.

In 2017, H&M plans to open stores in four to five new markets, of which Colombia will be one. H&M’s e-commerce will also be launched in Canada and South Korea during autumn 2016.

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