H&M Profits Up, Higher Retail Prices Loom

H&M aims to boost prices further this year, it said on Wednesday, June 29, 2022, after announcing forecast-beating profits with margins benefiting from fewer discounts, according to Reuters' Supantha Mukherjee and Anna Ringstrom.

Photo Insert: An increase in full-price sales and a drop in markdowns helped H&M expand its operating margin to 9.2 percent from 8.3 percent in the second quarter.

H&M boosted prices in the first half of the year in response to higher transportation and raw material costs, and Chief Executive Officer Helena Helmersson told Reuters that prices will likely climb throughout the remainder of the year. Hikes will differ based on the competitive climate, she said.

"Although most of the restrictions associated with the Covid-19 pandemic essentially seem to be over, many challenges remain. Disruption and delays still exist in the supply chain, but are gradually being eased. At the same time, there is substantial inflation," H&M warned.

Pretax profit at the world's second-largest fashion retailer increased by 33% year on year to 4.78 billion crowns ($471 million) in the Swedish group's second quarter, on sales growth of 12% in local currencies.

At 1133 GMT, H&M's shares were up 5% after the company reported a 5 percent increase in March-May profit as customers returned to its stores following the pandemic.

Despite rising expenditures, an increase in full-price sales and a drop in markdowns helped H&M expand its operating margin to 9.2 percent from 8.3 percent in the second quarter.

"Sales in physical stores increased substantially while online continues to do well," Helmersson said in a statement.

Analysts polled by Refinitiv predicted a 3.87 billion crown profit on average. Local-currency sales declined 6% in June, the first month of H&M's third quarter, owing primarily to the company's withdrawal from Russia, Ukraine, and Belarus. Russia was H&M's sixth-largest market, accounting for 4% of sales in the fourth quarter of 2021.

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