H&M posts drop in operating profit, Q2 sales up 10 percent

H&M’s fourth quarter net sales increased by 10 percent to 62,433 million Swedish krona, while in local currencies, net sales were flat. Excluding Russia, Belarus and Ukraine the increase was 11 percent in SEK and 2 percent in local currencies.

Net sales in SEK increased by 12 percent in the 2022 financial year to 223,553 million Swedish krona, while in local currencies, the increase was 6 percent. Excluding Russia, Belarus and Ukraine the increase was 15 percent in SEK and 8 percent in local currencies.

The H&M group’s sales increased by 5 percent in local currencies in the period from December 1, 2022 to January 25, 2023 compared with the same period last year. Excluding Russia, Belarus and Ukraine sales increased by 9 percent in local currencies.

Commenting on the trading update, Comments by Helena Helmersson, H&M’s CEO said in a statement: “Although 2022 was a turbulent year characterised by negative external factors such as geopolitical challenges and substantial cost inflation, our sales increased by 6 percent during the year.”

“Having left the worst of the negative effects of the pandemic behind us, war broke out in Ukraine. We quickly decided to pause sales in the countries affected and later to wind down our business in Russia and Belarus. Our decision to wind down the business in Russia, which was an important and profitable market, has had a significant negative impact on our results,” Helmersson added.

Review of H&M’s Q4 and full year performance

H&M said that the results for the fourth quarter were impacted by a one-time cost of 836 million Swedish krona for the cost and efficiency programme, and full year results were impacted by one-time costs of 2,591 million Swedish krona for winding down the Russian operations and of a cost and efficiency programme.

For the fourth quarter, gross profit amounted to 31,011 million Swedish krona, corresponding to a gross margin of 49.7 percent. Operating profit was 821 million Swedish krona, corresponding to an operating margin of 1.3 percent.

The group’s result after tax was negative 864 million Swedish krona, corresponding to negative 0.53 Swedish krona per share.

Gross margin for the year was 50.7 percent, while adjusted gross margin was 50.8 percent. Operating profit was 7,169 million Swedish krona, corresponding to an operating margin of 3.2 percent, while adjusted operating profit amounted to 9,760 million Swedish krona and the operating margin was 4,4 percent.

The group’s profit after tax was 3,566 million Swedish krona, corresponding to 2.16 Swedish krona per share, while adjusted profit after tax amounted to 5,634 million Swedish krona, corresponding to 3.41 Swedish krona per share.

“Sales in the new financial year have started well. The external factors are still challenging, but are moving in the right direction. Combined with our investments and efficiency improvements, there are very good prerequisites for 2023 to be a year of increased sales, and improved profitability. Thus, our goal of achieving a double-digit operating margin for full-year 2024 remains in place,” added Helmersson.

The company’s board of directors is proposing an ordinary dividend of 6.50 Swedish krona per share to the annual general meeting to be paid in two instalments.