Belfast Telegraph

Saturday 19 April 2014

H&M's slip showing as profits fall

A general view of a customer carrying a bag as they leave an H&M store in Nottingham city centre. PRESS ASSOCIATION Photo. Picture date: Wednesday June 22, 2011. Fashion retailer H&M underlined the challenges on the high street today after high cotton prices and a drop in consumer spending power hit profits. The Swedish chain, which has 2,297 stores worldwide including more than 180 in the UK, reported a 23% drop in pre-tax profits in the six months to May 31 to 9.3 billion Swedish krona (£900 million). See PA story CITY HM. Photo credit should read: Rui Vieira/PA Wire

Fashion retailer H&M underlined the challenges on the high street yesterday after high cotton prices and a drop in consumer spending power hit profits.

The Swedish chain, which has 2,297 stores worldwide including more than 180 in the UK, reported a 23% drop in pre-tax profits in the six months to May 31, to 9.3bn Swedish krona (£900m).

The company, which operates in 39 countries, said its gross margin had dropped to 59.9% in the period, from 64% a year earlier, as the high cotton price and soaring fuel costs squeezed profitability.

H&M is the latest retailer to report challenging conditions as the rising cost of living and muted wage growth, as well as the tough economic climate, stifles household spending.

H&M is particularly vulnerable to rising costs as its strategy focuses on offering fashionable garments at low prices.

The company reported a slight increase in sales, excluding VAT, from 51.9bn Swedish krona (£5.02bn) to 52.1bn Swedish krona (£5.04bn). Looking ahead, the group said it plans to open 178 stores in the second half of the year, after opening 102 in the first six months. The first H-amp;M store in the UK opened in 1976.