H&M Warns Profit Outlook Has Worsened on Lockdowns, Discounts

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Hennes & Mauritz AB warned it’ll be difficult to make a profit this quarter due to lockdowns, leading the Swedish clothing retailer to increase discounts to clear out a longstanding inventory buildup.

The stock fell as much as 5.3%. Sales plunged 23% in local currencies so far this quarter after lockdowns forced the retailer to shutter more than a third of its stores, the owner of the H&M chain said Friday.

H&M is still in “crisis mode,” Chief Executive Officer Helena Helmersson said on a call with analysts. Whether the company makes a profit in the quarter depends on how revenue evolves, which is “pretty uncertain.”

The CEO has slashed costs in her first year leading the retailer, which has been rockier than planned given the pandemic. H&M cut 16,000 full-time job equivalents during the past fiscal year as she leads its biggest reduction in its store network ever.

The first quarter, which runs through February, typically contributes less to full-year profit than other periods, and it also includes post-Christmas clearance sales, Nils Vinge, head of investor relations, said on the call.

Amid speculation that H&M might cancel or reduce its dividend, the company said there’s good prospects of a payment in the autumn and the board will decide later on how much and when.

H&M plans net closures of 250 shops this year after 58 last year. That’s a “dynamic target” and may be modified, Chief Financial Officer Adam Karlsson said in a Bloomberg TV interview.

Inventory rose 6% on an adjusted basis and reaching the equivalent of about 20% of 12-month revenue, higher than the level at Zara owner Inditex SA.

©2021 Bloomberg L.P.

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