Higher cotton and currency costs hit H&M

30 September 2011

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1 October 2011 | Angeline Albert

Higher purchasing costs have affected H&M Group's third quarter results, where profit fell by 15 per cent when compared with the same quarter in 2010.

The Swedish fashion retailer has been particularly affected by high cotton prices and the negative impact of the US dollar.
The group’s results for the nine months ended 31 August reveal profit after financial items was SEK 4.8 billion (over £453.3 million) in the third quarter. This is a drop of 15 per cent when compared with the same quarter in 2010, which was SEK 5.7 billion (£535 million).

"Unfavourable external factors during the buying period for the third quarter led to higher purchasing costs which affected the gross margin negatively in the quarter,” the report said. “These factors were primarily cost inflation in the sourcing markets, including high cotton prices, but also a negative US dollar effect.”

Total costs increased by 9 per cent in the third quarter this year when compared with the same period in 2010. In addition to higher cotton and currency costs, the company invested in its expansion and long-term improvements in marketing, IT and online and catalogue sales.

Despite challenges, the report said “cost control in the group remains good” with costs in its stores having decreased compared with the corresponding period last year”.

CEO Karl-Johan Persson, said: “H&M continues to gain market share in a challenging environment for the fashion retail industry. We have great respect for the current economic climate. In this situation, it is extra important to have a long-term perspective and to always make sure we give customers the best combination of fashion and quality for their money in every market.”

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