H&M posts much smaller quarterly profit despite rising costs

H&M logo is seen in a shop in Riga.

STOCKHOLM Reuters-H&M reported on Thursday a much smaller-than-expected pretax profit, despite cost inflation, a lack of consumer spending and one-off expenses related to its exit from Russia.

The Swedish group's fiscal third quarter saw its pretax profit fall to 689 million crowns $60.9 million from a year-earlier 6.09 billion. Five analysts who were polled by Refinitiv said the average predicted a 2.98 billion crowns profit.

A one-time cost of 2.1 billion crowns related to the winding down of H&M's Russian operations impacted the result, accounting for half of the loss in profits, the company said in a statement.

In July, H&M announced it was shutting down its business in Russia as a result of the country's invasion of Ukraine.

In Europe, where H&M has the bulk of business, a worsening security situation, record energy prices and high inflation are weighing on consumer confidence, and households are cutting back on shopping as they brace for tougher times.

H&M has announced a cost cutting programme that it predicted will result in annual savings of around 2 billion crowns, with savings expected to be visible in the second half of 2023.

It said autumn collections had been well received, with sales in local currencies up 7% year-on-year in the period Sept. 1st.