Cotton price and labour costs weigh on H&M's profitability
RETAILER NEWS
ProcurementLeaders.com - Jan 31st, 09:06
Hennes and Mauritz, Europe's second-largest clothing retailer, continues to struggle to counter the cost of making garments after reporting a fifth consecutive drop in quarterly profit.
Net income slipped 2.4% to 5.36 billion kronor (€602m) in the three months ended November 30th, Stockholm-based H&M said in a statement.
H&M said the macroeconomic climate will remain "tough" in many markets during 2012. Higher labour costs in Asia weighed on profit at the company, which described the situation in markets it sources from as "challenging".
Profitability was affected by record cotton prices in the first half of last year and increased discounting, Anne Critchlow, an analyst at Société Générale in London, told Irish Times.
"H&M has strengthened its price position over the past 18 months, which has reduced the gross margin," Ms Critchlow told the paper.
The number of markdowns in the first quarter of this year will be higher than a year earlier because of an increase in inventory, the retailer said.
H&M doesn't envisage big changes to sourcing in Asia, chief executive officer Karl-Johan Persson said at a press conference in Stockholm.
The company obtains about 75% of products from the region, compared with 35% for Inditex.
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