H&M has blamed its plummeting profits on “negative external factors” including one-time costs as a result of winding down trading in Russia, Belarus and Ukraine, as well as its cost and efficiency programme.

Helena Helmersson, H&M CEO

Helena Helmersson said pulling out of Russia ‘had a significant negative impact on our results’

For the three months to November 30, 2022, H&M reported an operating profit of SEK 821m (£64.4m), down year on year for the quarter.

The retailer also posted a gross profit of SEK 31bn (£2.43bn), resulting in a gross margin of 49.7%, down from 55.2% in the same period last year.

H&M said costs for purchases made in the fourth quarter were “very negative compared with the corresponding period last year” due to an increase in the cost of raw materials as well as a “historically strong US dollar”.

Despite this, net sales for the period increased 10% to SEK 62.4bn (£4.9bn) and H&M reported that net sales in local currencies were up 2%, inclusive of adjusted one-time costs.

The fashion giant also said it saw strong development in many markets over the quarter, reporting strong trading in the UK and across northern Europe.

For the full financial year, the H&M group reported a 12% increase in sales growth year on year to SEK 223.5bn (£17.5bn), up 6% in local currencies.

The group also reported that profit after tax amounted to SEK 5.6bn (£0.4bn).

Chief executive Helena Helmersson said: “Although 2022 was a turbulent year characterised by negative external factors such as geopolitical challenges and substantial cost inflation, our sales increased by 6% during the year.

“Having left the worst of the negative effects of the pandemic behind us, war broke out in Ukraine. We quickly decided to pause sales in the countries affected and later to wind down our business in Russia and Belarus.

“Our decision to wind down the business in Russia, which was an important and profitable market, has had a significant negative impact on our results.”

H&M said its long-term goals remain in place, including its forecast of achieving a double-digit operating margin for the 2024 financial year.

In terms of outlook, Helmersson added: “The external factors that have had a negative effect on our purchasing costs are gradually reversing and are expected to become positive for our results in the second half of 2023.”

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