H&M bottom line feels the pinch

For the full-year 2011, H&M posted a net profit of 15.82 billion kronor ($2.33 billion), down from 18.68 billion kronor in 2010, largely owing to soaring prices for materials, especially cotton, which significantly hiked its purchasing costs, the company said in its earnings statement.

Sales meanwhile swelled 1.5 percent to 128.8 billion kronor.

“H&M stands strong in a challenging market,” chief executive Karl-Johan Persson insisted in the statement.

The company “continued to gain market share during what was one of the toughest years for a long time for the fashion retail industry in many countries,” he added.

Following the news, H&M saw its stock price slip 1.07 percent in mid-morning trading on a Stockholm stock exchange up 0.45 percent.

In the fourth quarter of 2011, H&M meanwhile saw its net profit slip 2.4 percent year-on-year to 5.36 billion kronor, which was basically in line with the expectations of analysts polled by Dow Jones Newswires, who had anticipated a net profit for the quarter of 5.4 billion kronor.

During the October-December period, H&M saw its sales jump four percent year-on-year to 36.2 billion kronor.

“Sales are considered to be satisfactory considering that consumption in many of H&M’s markets was affected by unseasonably warm weather and was also restrained due to concerns regarding the effects of the debt crisis in Europe,” the company said.

During all of 2011, the fashion giant opened 266 new stores and entered five new markets, creating a total of around 7,000 new jobs, Petersson said.

“Our strong expansion continued during the year,” he said, pointing out that H&M today counts around 2,500 stores in 43 countries with some 94,000 employees.

“We are also planning for a strong expansion in 2012 with approximately 275 new stores net,” he said, insisting that despite the economic and financial downturn, H&M expects to “strengthen (its) already strong market position even further.”

The company said it plans to open most of its new stores next year in China, the United States and Britain, while it will become a player in markets in Bulgaria, Latvia, Malaysia and Thailand, as well as Mexico, which will mark its first ever store in Latin America.

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