Fashion chain H&M hit by higher costs

23 June 2011

23 June 2011 | Angeline Albert

Steeper purchasing costs knocked the profits of H&M in the second quarter of 2011, its financial results reveal.

Raised cotton and transport costs contributed to a larger than expected fall in the Swedish fashion retailer’s profits in the first six months of 2011.

The company’s financial report declared pre-tax profits of 5.75 billion SEK (£562 million) for the second quarter, down from its 5.89 billion SEK (£575 million) forecast. Its gross margin was 61.7 per cent, lower than its 62 per cent forecast. The company said this had been negatively affected by “many unfavourable external factors in the sourcing markets”.

In its report, published on Tuesday, H&M said: “Our profitability remained strong with an operating margin of 20.3 per cent despite strong negative effects from many external factors that were beyond our influence. Also, the strong development of the Swedish krona continued to have a substantial negative effect on our reported profits in SEK.”

The company added: “We are optimistic about the future for H&M despite challenging conditions both in the sales markets and in the sourcing markets.”

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