H&M Struggles Persist: Earnings Down 28% Amid Soft First-Half Sales

H&M continues to suffer. The Swedish giant, the world’s number two retailer, ended the first half of the year with a sharp decline that was already evident in the first three months. The company closed the period with a downward trend in both sales and net income, in a half-year marked by exchange rates and higher transport costs.

In the first six months of the year (December to May), the Swedish group posted sales of SEK 112,047 million ($11.7 billion), a decline of 1% compared to the same period last year. Along with the drop in sales, H&M’s profit for the half-year fell by another 27.8% to SEK 4,5 billion ($4.7 billion).

“This past quarter’s results were negatively impacted by higher purchase prices resulting from a more expensive U.S. dollar and freight rates, as well as our continued investment in our offering,“ said Daniel Ervér, the company’s CEO.

H&M has reduced its profit to SEK 4,5 billion ($4.7 billion)

The company’s gross profit fell another 4.3% to SEK 58,594 million ($6,15 million). The gross margin, meanwhile, fell by two points to 52.3%, down from 54% a year ago. The drop was even more pronounced in the company’s operating profit, down 22.4% to SEK 7,117 million ($7.4 billion).

By markets, it was precisely the Nordic region where H&M posted the biggest drop in sales, down 4% to SEK 9,766 million ($ 1.25 billion). The company also recorded a decline in turnover in Eastern Europe (3%), Asia, Oceania and Africa (3%) and the Americas (2%).

At the same time, sales were flat in Western Europe, H&M’s largest market in terms of revenue, at SEK 37,899 million ($3.9 billion). Southern Europe, meanwhile, is the only market in which H&M has increased sales, 3% more than in the first half of the previous year.

The group increased its stock by a slight 1% during the period, which reached a value of SEK 38,817 million (4.1 billion). H&M has been optimizing its retail estate for several years, closing almost half a hundred stores in the last three months alone. At the end of May this year, the company operated 4,166 stores worldwide, which translates into 153 fewer stores than at the same time last year.