H&M Revenue Growth Slows Down Due to War in Ukraine

by BLOOMBERG

HENNES & Mauritz AB reported a sudden slowdown in sales growth, becoming one of the first retailers to signal how the war in Ukraine is weighing on consumption.

Sales rose 6% in local currencies in March compared with 23% growth in the three months through February, H&M said Thursday. The shares fell as much as 11% in morning trading.

The war and a resurgence of Covid in China are weighing on the prospects for retail, making the recent recovery short-lived. H&M has paused sales in Russia, its sixth-biggest market, accounting for about 4% of total revenue. H&M had 227 stores closed as of Wednesday, most of them in Russia, Belarus and Ukraine.

Excluding those three countries, revenue rose 11% in March.

Pretax profit reached 282 million kronor ($30 million) in the three months through February, far short of the average analyst estimate of 1.05 billion. H&M said bigger investments in technology and the supply chain weighed on earnings.

H&M’s inventory began to pile up in 2016, and the retailer is still struggling to bring down the level, which exceeds $4 billion. It edged up to 18.9% of 12-month sales from 18.7% at the end of November. H&M said about a sixth of the stock-in-trade is held to mitigate any supply-chain delays.

The retailer raised a target for net store closings to 145 shops this year, up from 120 previously. H&M’s contracts allow for a third of its leases to be renegotiated or each year.