The Swedish clothing giant H&M announced an unexpected loss in the fourth quarter on Friday, at the end of a 2022 financial year weighed down by its withdrawal from Russia and a combination of other unfavorable factors.
The action of the world number 2 in the sector, behind the Spanish Inditex (Zara), fell sharply in the first bags of the Stockholm Stock Exchange after the announcement of these results, falling almost 7%.
In addition to the closure of its many Russian stores, H&M suffered from rising raw material and freight prices and a high dollar, its manager Helena Helmersson said.
The last quarter of the slightly delayed fiscal year (December 2021-November 2022) was marked by a net loss of 864 million crowns (77 million euros).
This was unexpected for analysts, who were betting on clearly positive profits of more than 2,000 million, according to the Bloomberg and Factset agencies.
H&M said it was also hit last quarter by restructuring costs linked to 1,500 job cuts announced at the end of November.
Over the entire financial year, the group’s turnover increased by 12% to SEK 223.5 billion, but only 6% excluding currency effects.
A very strong impact from Russia
The number of stores in the group (H&M, COS, Monki, Weekday, &OtherStories…) fell to 4,465 at the end of November, that is, 336 less than a year earlier, with almost half of the impact linked to the withdrawal of Russia and Belarus (175 stores closed).
At the same time, annual net profit fell by 68% to just under SEK 3.6 billion.
H&M explains that the accumulation of unfavorable factors had a negative effect of five billion in total on its profits.
However, 2023 should be better, according to H&M.
The group maintained its goal of achieving a “double-digit” operating margin in 2024, up from 7.7% in 2022.
H&M confirmed in mid-December that it had closed its last stores in Russia, following a withdrawal initiated several months earlier following the invasion of Ukraine.
Already faced with numerous mandatory store closures during the first two years of the Covid-19 pandemic, the Swedish giant had also suffered a boycott movement in China in 2021.
This was related to the group’s decision to sever all ties with the textile industry in Xinjiang.
As it tries to reduce the environmental impact of its “fast fashion” to continue to appeal to younger consumers, the group is also seeing the rise of new, even lower-cost competition, such as Chinese online retailer Shein.
H&M has struggled for several years to breathe new life into its model: profits have fallen steadily over the past decade, plus a rebound in 2021 with the lifting of Covid lockdowns and restrictions.
Source: BFM TV
