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H&M sales rise as Russia clouds outlook

// H&M sales rise despite the retailer’s outlook remaining uncertain amid the war in Ukraine
// “Sales and profits for the quarter were impacted by the negative effects of the pandemic in many of the group’s major markets,” H&M said in a statement

H&M has seen sales increase during its first quarter as the effects of Covid-19 being to ease, while the closure of its Russian stores and the economic fallout from the ongoing war in Ukraine has made the retailer’s outlook more uncertain.

Analysts polled by Refinitiv on average expect the world’s second-biggest fashion retailer to report a pre-tax profit of £85.4 million for its first quarter.

Sales rose 6% in local currencies in March compared with 23% growth in the three months through February, but these were down 11% from two years earlier, before the pandemic hit.

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“Sales and profits for the quarter were impacted by the negative effects of the pandemic in many of the group’s major markets,” H&M said in a statement.

“The result was also affected by increased growth-related initiatives, particularly within tech and the supply chain.”

Last year, when almost half of its stores were forced to close amid worldwide lockdowns, H&M made a 1.39 billion crown loss. Two years ago, it made a 2.50 billion crown profit

Alongside countless of other retailers reacting to Russia’s invasion of Ukraine last month, H&M announced it would be temporarily closing its stores in Russia, expressing concerns about the “tragic developments in Ukraine”.

Russia was H&M’s sixth-biggest market with 4% of sales in the fourth quarter of 2021 and while the group is reducing its store count overall, it has been increasing its number of stores in Russia, to 170 at the end of November.

Analysts have been lowering full-year earnings estimates for H&M recently and RBC analysts said in a note that: “For H&M we could see further downside risk to estimates if H&M decides to pull out of Russia/Ukraine permanently due to the conflict there, or this leads to further upwards pressure on inflation and commodity prices,”

H&M’s sales halt in Russia follows a sharp drop in demand in China over the past year, related to concerns the group has expressed about workers’ rights in the Xinjiang cotton growing province. China had accounted for around 4% of H&M’s sales.

Back in January, H&M unveiled targets to double sales by 2030 as it heralded a “strong recovery” and plans to reach an operating margin of 10% by 2024 – last year it reached 7.7%.

Inditex, the owner of Zara, grew sales 33% year-on-year, and 21% from the same period in 2019, in the six weeks from February 1st.

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The post H&M sales rise as Russia clouds outlook appeared first on Retail Gazette.



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