Despite the difficult framework conditions, the Swedish clothing retailer Hennes & Mauritz AB (H&M) achieved significant growth in sales and earnings in the first half of the 2021/22 financial year. The parent company of brands such as H&M, Cos, Monki, Weekday, & Other Stories and Arket benefited above all from the lifting of almost all protective measures against the Covid 19 pandemic, which had had a significant impact on business in the same period of the previous year. In the interim report published on Wednesday, CEO Helena Helmersson warned of the possible consequences of the currently unusually high level of inflation for future developments.
In the months from December to May, the retailer generated sales of 103.7 billion Swedish crowns (9.70 billion euros). It thus exceeded the level of the same period of the previous year by 20 percent. Adjusted for exchange rate changes, revenues increased by 15 percent. At 5.45 billion Swedish crowns, the operating profit was almost exactly twice as high as in the first half of last year. The net result even jumped by 129.8 percent from 1.70 to 3.90 billion Swedish crowns (364.8 million euros).
In the second quarter, the results exceeded market expectations
Strong growth in the second quarter, with which the Group was able to exceed market expectations, contributed to the significant improvement. Hennes & Mauritz announced two weeks ago that sales had increased by 17 percent (currency-adjusted +12 percent) to 54.5 billion Swedish crowns compared to the same period last year. Growth was slowed down by the temporary cessation of activities in Russia, Belarus and Ukraine due to the Ukraine war. Adjusted for the consequences of this measure, sales in the period from March to May would have exceeded the previous year’s level by 17 percent after currency adjustments, the group said.
Quarterly sales increased 7% (+5% currency-adjusted) to SEK 5.06 billion in Nordics, 22% (+18% currency-adjusted) to SEK 18.5 billion in Western Europe and 36% (+18% currency-adjusted) to SEK 18.5 billion in Southern Europe +39 percent) to 6.88 billion Swedish crowns. In America, the group was able to increase its revenues by 30 percent (currency-adjusted +14 percent) to 12.6 billion Swedish crowns, in Asia, Oceania and Africa sales were 7.39 billion Swedish crowns and thus by 14 percent (currency-adjusted +5 percent) above the previous year’s level. Only Eastern Europe went down, where the lack of sales in Russia, Belarus and Ukraine caused a decline of 22 percent (currency-adjusted -23 percent) to 4.12 billion Swedish crowns.
Surprisingly, the company was able to significantly improve its earnings. Operating profit grew 29.5 percent year-on-year to SEK 4.99 billion, while net profit rose 33.1 percent to SEK 3.68 billion. CEO Helmersson justified the strong increase with the positive response to the current collections, among other things. Thanks to the strong demand, more products were sold at full price and smaller discounts were necessary, she explained.
Dampening growth in June – CEO Helmersson warns of the consequences of high inflation
But the CEO also warned of continued adversity: “Although most of the restrictions related to the Covid 19 pandemic appear to be essentially over, many challenges remain. Disruptions and delays still occur in the supply chain, but are gradually diminishing. At the same time, there is significant inflation,” Helmersson said in a statement. She also referred to the uncertainties regarding the further consequences of the Ukraine war.
The problems had already made themselves felt in the past few weeks: According to the information available, sales in June were six percent below the previous year’s level after currency adjustments. The group explained that five percentage points of the decline were due to the lack of revenue in Russia, Belarus and Ukraine. In addition, the retailer referred to the very high comparative level of the same month last year, in which sales had increased by 24 percent after the elimination of pandemic-related restrictions in important markets.
In addition to the current figures, the company announced further expansion steps, in which Latin America currently plays a major role, and the start of a new share buyback program. In the coming months, the group wants to acquire its own share certificates with a total value of up to three billion Swedish crowns.