H&M hit by higher purchasing costs

29 March 2012

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29 March 2012 | Angeline Albert

Clothing retailer H&M Group swallowed higher purchasing costs in the first quarter of 2012 compared with the same period last year, its latest financial results reveal.   

In a report on its results for January to March, published yesterday, the Swedish retailer said buyers sourcing cotton paid higher prices for the raw material. The increase was absorbed by the group instead of being passed on to customers, which resulted in the company’s gross margin for the period falling to 55.8 per cent from 57.8 in the same quarter of 2011. Overall the retailer experienced strong sales, with a rise of 13 per cent compared with January-March 2011.

Group CEO Karl-Johan Persson, said: “Despite increased purchasing costs, we have continued to strengthen our customer offering – for example, by not raising our prices to customers. This has contributed to strong sales even if, combined with the increased purchasing costs, it has had a negative effect on the gross margin in the quarter. The increased purchasing costs are due partly to higher cotton prices…but also to our long-term investments aimed at broadening our total offering.”

The group said that as part of its long-term investment plan, its purchasing function and production offices are being “strengthened with new colleagues and IT investments”. It also hopes to open a completely new store chain in 2013, which will require buyers to source larger quantities of raw materials.

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