H&M’s operating profit fell by 87 per cent in the fourth quarter.
The hikes in raw materials and freight costs combined with a historically strong dollar resulted in extensive cost increases for purchases of goods.
The Swedish retailer launched a cost-cutting program in 2022 that included 1,500 job losses. Sales in the fourth quarter were up ten per cent but were flat in local currency terms. Sales from December 1, 2022, until January 25, 2023, increased by five per cent in local currencies. Since sales in the new financial year have started well, the group hopes sales, profitability, and inventory levels all improve this year since external factors are still challenging but are moving in the right direction.
The goal for next year is that of a double-digit operating profit margin from 3.2 per cent in 2022. The Swedish retailer has often ended up with large amounts of garments it has had to discount. H&M is increasing its production in Europe and looking at Latin American countries as part of an attempt to do more near-shoring and be able to respond more quickly to fashion trends.The retailer expects to have lower inventory in 2023 but capital expenditure is expected to increase 50 per cent.