STOCKHOLM (AP) — Low-cost fashion brand Hennes & Mauritz AB reported Wednesday a 17 percent drop in its second-quarter net profit and sluggish sales growth, partly due to cold spring weather and as a stronger dollar increased its costs.
The Swedish fashion retailer said sales grew 5 percent in the quarter in local currencies but rose only 2 percent — to 54.3 billion kronor ($6.6 billion) — when converted to the Swedish currency. Profit plummeted to 5.3 billion kronor from 6.4 billion a year earlier, with increased markdowns and investments.
Sales of spring clothes were hurt by a cold March and April in many markets, but May was "significantly better," H&M said.
CEO Karl-Johan Persson said that the first half of the year was difficult but he expects future growth for the Stockholm-based company, which has 4,000 stores in 62 markets and plans to open more than 400 more this year.
"It has been a challenging half-year for fashion retail in many markets, but we have great confidence going forward and are continuing to develop our offering further within all our brands," Persson said. "The combination of strong brands, a large body of retail stores in good locations and a successful e-commerce business puts us in a unique market position for future growth."
H&M launched online sales in nine new markets this year, to a total of 32, with two more launches due later this year — in Canada and South Korea. It plans to further expand online business next year.
Persson said that although e-commerce is growing fast, there is "still great potential for the H&M group to continue to expand through physical stores," adding that stores and online business complement each other.
Germany and the U.S. remained H&M's leading markets, followed by Britain and France.
The company's share price was slightly lower at 249.70 kronor in afternoon trading in Stockholm.