Wash-out spring sales, strong dollar hurt H&M’s Q2 earnings

No shocks from H&M, given its recent uninspiring trading update. The Swedish fashion retail giant Wednesday said Q2 profit fell 17%, hit by weak spring sales, the strong dollar and the cost of long-term investments.

Net profit in the quarter ending May 31 fell to SEK5.35bn ($649.6m) from SEK6.45bn a year ago. Analysts had expected SEK5.46bn. EPS fell to SEK3.24 from SEK3.90 last year. Its share price was down0.68% in early trading Wednesday.

Last week, H&M said Q2 sales, excluding value-added tax, rose 5% to SEK46.87bn from SEK45.87bn a year ago as March and April sales were “significantly below expectations”, admitted chief executive Karl-Johan Persson.

That cold spring weather in many of its markets resulted in higher markdowns and weaker margins.

“The fact that the sales increase in the quarter was below plan, naturally also had an impact on profits,” Persson confirmed.

“It has been a challenging half-year for fashion retail in many markets, but we have great confidence going forward.”

No surprises too in its ever-growing global store count, now up to 4,077 on May 31 from 3,639 a year ago. The group also plans around 425 new stores for the 2015/2016 fiscal year. During the quarter, H&M also launched e-commerce in nine countries, including Ireland, Japan and Greece, to total 32 countries. This autumn it will also open online stores in Canada and South Korea.