H&M sales up 7 percent but profit falls on strong dollar

For the first nine months to December 1, 2015 to August 31, 2016, the H&M group’s sales including VAT increased by 7 percent in local currencies. Converted into SEK, sales including VAT increased by 5 percent to 161,767 million Swedish krona (18,850 million dollars). Sales excluding VAT amounted to 139,547 million Swedish krona (16,257 million dollars).

Commenting on the Group’s performance, Karl-Johan Persson, CEO of H&M said, “Sales were good in most of the markets up until mid-August. Thereafter sales were negatively affected by unseasonably hot weather which continued into September, resulting in a challenging start to the autumn season. The sales performance in the third quarter and increased mark-downs due to a higher opening stock than planned had a negative impact on profit development. In addition, profits continued to be negatively affected by the strong US dollar effect on purchasing costs.”

Detailed review of the nine months

Profit after financial items amounted to 16,630 million Swedish krona (1,937 million dollars) against 20,094 million Swedish krona (2,340 million dollars) last year. The group’s profit after tax amounted to 12,722 million Swedish krona (1,481 million dollars) compared to 15,372 million Swedish krona (1,790 million dollars), corresponding to 7.69 Swedish krona (0.90 dollars) compared to 9.29 Swedish krona (1.08 dollars) per share last year.

For the third quarter from June 1, 2016 to August 31, 2016, the company’s sales including VAT increased by 8 percent in local currencies. Converted into SEK, sales including VAT increased by 6 percent to 56,802 million Swedish krona (6,615 million dollars). Sales excluding VAT amounted to 48,982 million Swedish krona (5,706 million dollars). Profits in the third quarter were negatively affected mostly by increased mark-downs but also due to higher purchasing costs from the strengthened US dollar.

Retail expansion plans and outlook

So far this year, H&M has opened nine new online markets and 211 stores net. The company plans to open 214 new stores in the fourth quarter. Its debut H&M store in Nicosia in Cyprus was launched recently and in October, the company will be opening its first store in Auckland in New Zealand. By the end of the year, it aims to have stores in 64 markets – and 35 of which will offer H&M shop online.

H&M’s e-commerce will be launched in Canada and South Korea during autumn 2016. A total of 11 new H&M online markets will thus be added in 2016. In 2017, H&M plans to open stores in four to five new markets including Colombia, Iceland and Kazakhstan. The group also plans to launch one or two new brands in 2017.

The H&M group’s sales including VAT in September 2016 are expected to increase by 1 percent in local currencies compared to the same month last year. The company said, exceptionally warm weather in September delayed the start of the autumn season.

Picture:H&M