PARIS — H&M Group reported fourth-quarter net sales were unchanged in local currencies in the three months to Nov. 30, compared with the same period last year.
In reported terms, sales rang up at 62.45 billion Swedish kronor, or $6.13 billion at current exchange, up from 56.8 billion kronor a year ago. That marks a 10 percent increase in net sales due to currency exchange. The Swedish krona hit an all-time low against the U.S. dollar on Sept. 27, during the reporting period.
Excluding Russia, Belarus and Ukraine, the increase was 11 percent in kronor and 2 percent in local currencies. The last stores throughout the region were closed on Nov. 30. The Russian business was one of its fastest-growing segments prior to the shutdowns.
Also during the quarter, between 25 and 50 stores in China were temporarily closed, due to COVID-19 rolling closure policies there.
In addition to its cornerstone brand H&M, the company operates the Arket, Cheap Monday, Cos, & Other Stories, Monki and Weekday brands. H&M continues to grow its Arket brand, with new flagships across Europe and Asia.
The sales numbers were reported just after the Swedish fast-fashion giant announced on Nov. 30 plans to trim 1,500 jobs as part of a cost-cutting drive. The workforce reduction is expected to provide annual savings of around 2 billion Swedish kronor, or $189.8 million.
Reporting the full fiscal year to Nov. 30, net sales in local currencies were up 6 percent. In Swedish kronor, that amounted to 223.57 billion.
H&M shares fell sharply on the news, closing down 6.85 percent. The company’s stock price is down 36 percent year-to-date as the apparel industry is hit by inflationary pressures and cautious consumers.
The fourth-quarter numbers were very slightly ahead of analyst expectations. In a research note, RBC analyst Richard Chamberlain said the company faced “heavy gross margin headwinds” including exchange rates, raw materials, operating expenses and higher energy costs.
The pattern will likely continue into 2023, analysts said. They see global headwinds and higher energy costs impacting the company in the short term, but predict currency recovery against the U.S. dollar and the easing of inflationary cost pressures will boost their gross margins in the second half.
“We think H&M has taken various steps to improve its omnichannel offer for customers, which should lead to it holding its own in major markets. We think product flow is moving in the right direction, and we expect price reductions from Asia suppliers due to lower raw material costs and a softer global buy,” the note said.
To ease energy pressures, the fast-fashion giant on Tuesday signed an agreement with Swedish energy supplier Neoen and solar provider Alight for a new solar park in Sweden. Construction on the new project is set to start in the second half of 2023 and be online in 2025.
The full-year financial report will be published on Jan. 27, 2023.