H&M sales soar but shares slip on wider Ukraine impact concern

Clothing company temporarily closed its stores in Russia earlier this month

H&M reported a 23 per cent rise in first quarter sales on Tuesday, which was in line with market expectations, as the world’s second-biggest fashion retailer attempts to build on its recovery from the Covid-19 pandemic.

Shares in Sweden's H&M, which did not give any comment in its statement, were down 3 per cent in early trade as analysts focused on the potential impact of the Ukraine crisis on its business in central and eastern Europe and wider global repercussions.

Net sales in H&M’s fiscal first quarter from December through February, its seasonally slowest, were up by 18 per cent in local currency terms, at 49.2 billion crowns (€4.68 billion), compared with an average forecast from analysts polled by Refinitiv of 49.1 billion crowns.

Credit Suisse said in a note the figures implied a slowdown in local-currency sales growth to about 14 per cent in February, from the about 20 per cent flagged previously for December-January.

H&M earlier this month temporarily closed its stores in Russia, which last quarter accounted for 4 per cent of group sales, joining a growing list of international companies shunning the country over its invasion of Ukraine.

RBC analyst Richard Chamberlain said he had cut profit estimates for H&M for this year and next by about 10 per cent, pointing to the Russia store closures but also the fact central and eastern Europe account for some 12 per cent of group sales.

Less than a month before Russia invaded Ukraine, H&M had drawn a line under the pandemic, and several tough years before that, reporting a jump in profit and saying it was hiking investments with the aim of doubling sales by 2030.

Credit Suisse analysts noted that while Russia accounts for a small share of H&M’s sales, the Ukraine crisis could result in a material effect on global disposable income and demand.

Russia, which calls its actions in Ukraine a “special military operation”, has proposed nationalising assets of foreign firms that leave in the wake of economic sanctions.

H&M will publish its full quarterly earnings report on March 31st. Its biggest rival Inditex, the owner of Zara, is due to report quarterly results on March 16th. – Reuters