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Increase in sales countered by negative currency effects.
A strong US dollar (USD) and an unseasonably warm autumn dented Swedish retail group Hennes & Mauritz AB’s first quarter profits, the group has revealed. Its brands include H&M, COS, Monki, Weekday, & Other Stories and Cheap Monday.
Its sales in the period beginning from December 2015 through till the end of February 2016 grew by 9% in local currencies year-on-year, but profits dropped by 30%. The group’s largest markets in terms of sales were Germany, the US, the UK, France, Sweden, China and Italy.
“Profits in this year’s first quarter have been negatively affected by a continued very negative US-dollar effect which made our purchasing much more expensive, as well as by increased markdowns due to larger volumes of winter garments that remained as a result of the warm autumn,” says Karl-Johan Persson, the group’s CEO.
Sales and profits are reported in the Swedish krona (SEK). This strengthened against most other currencies relevant to the group in the first quarter of its current financial year, resulting in a ‘negative currency translation’.
“A strong US dollar has made purchases more expensive for the group,” says Alex Bennett, Fashion Business specialist at currency exchange company Smart Currency Business. “Meanwhile, a strong Swedish krona meant that the group has generated less profits when converting overseas sales back to its base currency.”
The group has expanded its e-commerce availability; as of March 2016, it was operating in seven new markets: Croatia, Estonia, Ireland, Latvia, Lithuania, Luxembourg and Slovenia. It also has plans to launch its e-commerce facility in Japan, Greece, Canada and South Korea. The group is also aiming to open an additional 425 new stores for its current financial year, with China and the US seeing the most new shops.
Image credit | JuliusKielaitis / Shutterstock.com
