At H&M, third-quarter net profit plummeted 89%, especially after its withdrawal from Russia. The Swedish clothing giant must now start saving more than 180 million euros annually.
Profit plummets
The third quarter gave H&M a hangover: the world’s second largest clothing group, after Inditex, saw profits plummet. Analysts were assuming 2.98 billion Swedish kroner in pre-tax profit, but that turned out to be only 689 million (about 63 million euros). In fact, net profit fell 89% to 531 million kroner (about 49 million euros).
Half of the drop in profits was due to the decision to stop and then divest operations in Russia after the invasion of Ukraine. “This has had a significant effect on our sales and profitability,” said CEO Helena Helmersson. H&M’s sales rose to 57.5 billion kroner (5.25 billion euros), up 3%. This was in line with expectations, though. In September, sales were 7% better than a year earlier.
New savings plan
With a new savings plan, H&M now plans to save 2 billion kroner (180 million euros) a year. The Swedish group talks about “cost savings and efficiency improvements”, without giving details about the concrete measures. The effects should become visible from the second half of 2023.
Russia, the group’s sixth market, accounted for more than 2 billion Swedish kroner (180 million euros) in sales in the fourth quarter of last year. To date, H&M has permanently closed “just over 30” of its 172 stores in Russia. H&M will also close its three stores in Belarus. The group had a total of 4,664 stores worldwide at the end of August.
