H&M's slip showing as profits fall
Published 23/06/2011 | 08:00
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.