Profits miss forecasts at H&M

Shares in Hennes & Mauritz fell on Thursday after first-quarter numbers widely missed analyst expectations and the war in Ukraine weighed heavily.

The Swedish fashion retailer reported net sales up 23%, or 18% in local currencies, at SEK49.17bn, while operating profits for the three months to 28 February came in at SEK458m against a SEK1.13bn loss a year previously.

Pre-tax profits were SEK282m, compared to last year’s loss of SEK1.39bn. That, however, was well short of analyst expectations. They had been looking for pre-tax profits closer to SEK1.04bn. Sales also remained 11% lower year-on-two-years.

As at 1015 BST shares in H&M had lost 9%.

H&M said the quarter had been marked by the Omicron variant as well as increased investment.

"In some of the largest markets the stores were forced to close, while the stores that were open were impacted by extensive restrictions," it noted.

"Sales and profits…were impacted by the negative effects of the pandemic in many of the group’s major markets and by increased growth-related initiatives, particularly within tech and the supply chain."

Chief executive Helena Helmersson said: "In addition to the general consequences of the pandemic such as disruptions and delays in the supply chain, some of our major markets were impacted by a new wave of the pandemic in the first quarter.

"Despite this we saw a recovery of sales in physical stores compared with last year, while online sales continued to perform well."

Looking to the current quarter, the group - which also owns Cos, Arket, Weekday and & Other Stories - said it had paused all sales in Russia, Belarus and Ukraine, with a total of 185 stores as well as online sales in Russia affected.

Net sales rose 6% in local currencies in the period 1 to 28 March.

Helmersson said: "We are deeply concerned about the war in Ukraine and are following developments closely. Once again, we have to be flexible and act quickly as circumstances change."

Victoria Scholar, head of investment at Interactive Investor, said: "Supply chain bottlenecks, inflationary cost pressures and subdued customer demand have created a cocktail of headwinds for H&M in the aftermath of the pandemic.

"However, the Ukraine war has created yet another significant pressure for the company, with sales and profits likely to slow further. Its challenges have been reflected by the share price, which has shed more than 40% over the last year, with the potential for further downside as investor confidence in the company continues to soften."