H&M under pressure as economy and bad weather impact profits

27 September 2012 10:13

H&M under pressure as economy and bad weather impact profits

H&M has missed analysts' expectations as its margins shrank in the third quarter of its financial year and announced that it would be delaying the launch of its online store in the US.

Although sales increased 10% in local currencies, like-for-like sales were unchanged in the period and its gross margin narrowed to 58.2% from 58.6% a year earlier.

The company said that it had been hit by wider conditions in the fashion retail industry, "both as regards the weather and the macroeconomic climate".

However, the company said that it was ramping up the pace of expansion, with around 300 stores new stores now planned, up from the 275 previously intended.

The company also said that Chile will become H&M's first market south of the equator when the first H&M store opens in Santiago de Chile during the first half of 2013 and that Lithuania will become a new H&M market in autumn 2013 when the first H&M stores open in Vilnius.

Karl-Johan Persson, CEO, commented: "H&M continued to gain market share and increased sales by 10% in local currencies in the quarter which proves that we have an attractive offering that is appreciated by customers worldwide. Conditions in the fashion retail industry continued to be challenging in many markets – both as regards the weather and the macroeconomic climate."

He continued: "We see significant opportunities for continued growth both in stores and online. We are ramping up the rate of expansion for full-year 2012 to 300 new stores net from the previously planned 275. We are looking forward to taking our first step into the southern hemisphere next year by opening our first store in South America, which will be a flagship store in Santiago de Chile. The online market is increasingly growing, with particularly strong growth in mobile shopping via smartphones and tablets. To accommodate this rapid development, from as early as the beginning of next year we will also offer a completely mobile adapted H&M shop online in H&M's existing eight online markets. Meantime, we have intensified preparations for the rollout of H&M shop online to other markets in the Group. These investments – and as we need more time for the launch of our online shop for the US – mean that the launch of H&M shop online in the US has been moved to summer 2013."