STOCKHOLM, Jan 27 (Reuters) – Fashion retailer H&M’s (HMb.ST) profits were almost wiped out in the September-November quarter by soaring costs, which the Swedish company held back from passing on in full to cash-strapped customers.
The world’s second biggest fashion chain, which raised some prices, will continue with this pricing strategy even though it will not fully compensate for the higher costs, such as for energy, transport and raw materials.
Helmersson, speaking at a news conference on Friday, said the group would keep raising prices in some categories to a varying extent in different markets to partially make up for continued high costs.
“It’s a very dynamic pricing strategy,” she told Reuters in an interview. “It will still be very challenging in the first quarter of 2023. And then of course we need to increase prices, but not to cover the whole.”
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The retailer said its exit from Russia and the financial impact of a cost-cutting drive announced last year also contributed to the fall in profit.
The world’s second-biggest fashion retailer reported a profit before tax for the period of 463 million Swedish crowns ($44.94 million), against a year-earlier 6.0 billion. Analyst polled by Refinitiv had forecast a fall to 3.5 billion crowns.
H&M’s shares were down by 6% at 1222 GMT, capping a year-to-date rise to 10%.
Having already reported that sales in the quarter were flat measured in local currencies, H&M said on Friday the sales from Dec. 1 to Jan. 25 – the start of its fiscal first quarter – were up 5%.
Helmersson told the news conference chances were good that sales and profitability would improve in 2023, primarily towards the end of the year.[1/4] CEO of H&M Helena Helmersson, together with CFO Adam Karlsson, presents the company’s financial report during a news conference at H&M’s headquarters in Stockholm, Sweden, January 27, 2023. TT News Agency/Christine Olsson via REUTERS