H&M's Q3 results hit by Russia exit

The H&M group’s net sales in the third quarter increased by 3 percent to 57,450 million Swedish krona and in local currencies, net sales decreased by 4 percent.

In the current quarter, the company said in a statement, the autumn collections have been well received and sales increased by 7 percent in local currencies in the period. The company expects the cost of markdowns in relation to sales in the fourth quarter to increase slightly compared to the same quarter last year.

“The autumn collections have been well received and sales in September are up on the previous year, providing important proof that the H&M group is growing even when customers’ purchasing power is decreasing,” said Helena Helmersson, CEO of H&M Group.

Review of H&M’s third quarter performance

Sales for H&M’s portfolio brands in the third quarter increased by 12 percent in Swedish krona and by 5 percent in local currencies.

H&M said, a one-time cost of 2,104 million Swedish krona related to the winding down of the Russian operations impacted the result for the quarter.

Gross margin was 50.4 percent, while the reported gross margin was 49 percent compared to 53.2 percent.

Operating profit was 3,006 million Swedish krona, corresponding to an operating margin of 5.2 percent against 11.3 percent in the previous year. The reported operating profit was 902 million Swedish krona compared to 6,272 million Swedish krona last year, corresponding to an operating margin of 1.6 percent compared to 11.3 percent.

The group’s profit after tax was 2,151 million Swedish krona compared to 4,692 million Swedish krona, corresponding to 1.30 Swedish krona against 2.83 Swedish krona per share last year. Reported profit after tax amounted to 531 million Swedish krona compared to 4,692 million Swedish krona, corresponding to 0.32 Swedish krona against 2.83 Swedish krona per share.

“The third quarter has largely been impacted by our decision to pause sales and then wind down the business in Russia. This has had a significant effect on our sales and profitability, which explains half of the decrease in profits compared with the third quarter last year. Many other external challenges also made their mark on the quarter,” added Helmersson.

Highlights of H&M’s nine month results

Net sales in the nine-month period increased by 13 percent to 161,120 million Swedish krona, while in local currencies the increase was 8 percent.

The gross margin excluding the one-time cost for Russia was 51.3 percent (51.8). The reported gross margin was 51.1 percent (51.8).

Operating profit was 8,099 million Swedish krona and the operating margin was 5 percent compared to 6.3 percent last year. The reported operating profit was 6,348 million Swedish krona, corresponding to an operating margin of 3.9 percent against 6.3 percent last year. For rolling 12 months the operating margin was 5.8 percent.

The group’s profit after tax was 5,778 million Swedish krona , corresponding to 3.49 Swedish krona compared to 3.86 Swedish krona per share last year. Reported profit after tax amounted to 4,430 million Swedish krona, corresponding to 2.68 Swedish krona against 3.86 krona per share.

In 2022 H&M is launching in six new markets. As at August 31, 2022, the H&M group had 4,664, down by 192 compared to last year. In the current financial year 55 new stores have opened and 192 stores have closed. A total of 282 of the group’s stores are operated by franchise partners.