Swedish Retail Giant Struggles with Exchange Rates and Shipping Expenses
- H&M reports a decline in second-quarter sales
- Sales down to SEK 56.7bn (£4.5bn) from SEK 59.6bn last year
- Operating profit falls to SEK 5.91bn from SEK 7.10bn in the same period last year
- Lower gross margin due to stronger Swedish krona and increased purchasing costs
- Inventory levels improved, with fewer store closures contributing to a 3% increase in sales excluding closures
- Sales expected to rise 3% in local currencies in June
- H&M preparing to launch in Brazil by end of 2025
H&M, the Swedish fashion giant, has reported a decline in second-quarter sales due to ongoing headwinds from currency fluctuations and cost pressures. Sales for the March to May period reached SEK 56.7bn (£4.5bn), down from SEK 59.6bn a year earlier and just below analysts’ forecasts of SEK 57.0bn. The operating profit fell to SEK 5.91bn (£465m) from SEK 7.10bn (£560m) during the same period last year, slightly beating market expectations of SEK 5.88bn. The decline was mainly driven by a lower gross margin, affected by a stronger Swedish krona, increased purchasing costs linked to a higher US dollar, and rising freight expenses. CEO Daniel Ervér acknowledged these headwinds: ‘The quarter’s result was negatively affected by higher purchasing prices as a result of a more expensive US dollar and higher freight costs, but also by the fact that we have continued to invest in the customer offering.’ H&M also reported improved inventory levels, with stock growth slowing significantly compared to the previous quarter. The retailer is focusing on enhancing its product offering, online and physical shopping experiences, and expanding into growth markets. Ervér continued: ‘Our plan, with its focus on the product offering, the shopping experience and brand, is again confirmed by the progress we see. The positive development in important areas such as online, H&M womenswear and H&M Move, as well as continued focus on good cost control, will contribute to a profitable sales development.’ Sales in local currencies increased by 1% in the second quarter, with 4 percent fewer stores at the end of the quarter compared with the same point in time the previous year. Excluding these closures, sales increased by 3 percent. Looking ahead, H&M said that sales in June were expected to increase 3% in local currencies as demand shows signs of picking up over the summer months. The brand is also preparing to launch its first physical and online stores in Brazil in the latter half of 2025, aiming to bring ‘fashion and quality at the best price in a sustainable way’ to a market of more than 200 million consumers.
Factuality Level: 8
Factuality Justification: The article provides accurate and objective information about H&M’s financial performance, including sales figures, profit, and CEO comments on the factors affecting their business. It also mentions plans for expansion into new markets. The only potential issue is the link to another article at the end which may not be directly related to the main topic.
Noise Level: 3
Noise Justification: The article provides relevant information about H&M’s financial performance and the factors affecting it, as well as the company’s plans for growth. It also includes a quote from the CEO. However, it does not delve too deeply into the broader implications of these trends or provide significant analysis beyond what is stated by the company itself.
Financial Relevance: Yes
Financial Markets Impacted: No
Financial Rating Justification: The article discusses H&M’s financial performance, including a decrease in sales and operating profit due to currency fluctuations and cost pressures. It also mentions the company’s plans for future growth and expansion into new markets.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: There is no extreme event mentioned in the article.
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