Stockholm: The second-largest fashion retailer in the world, H&M, reported Thursday that its pretax profit for June-August was much lower than expected. This was due to rising costs, less spending by consumers, and one-time costs related to its exit from Russia.
The Swedish Group’s pre-tax profit in the third quarter of its fiscal year dropped from $6.09 billion the year before to $60.9 million. Five analysts polled by Refinitiv said that the company would make an average of 2.98 billion crowns.
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In a statement, the company said that half of the drop in profits was caused by a one-time cost of 2.1 billion crowns related to the end of H&M’s operations in Russia.
H&M said in July that it would stop doing business in Russia because that country had invaded Ukraine.
Most of H&M’s sales come from Europe, where security is getting worse, energy prices are at an all-time high, and inflation is high. These things are hurting consumer confidence, and people are shopping less as they prepare for tougher times.
H&M announced a plan to cut costs that it said would save about 2 billion crowns per year. The company said that the savings would start to show in the second half of 2023.
It said that the fall collections had been well received, and that sales in local currencies were up 7% from the same time last year to September 27.
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($1 is worth 11.3104 Swedish crowns)