Hennes & Mauritz (H&M) AB reported a sudden slowdown in sales growth, becoming one of the first retailers to signal how has the war in Ukraine is weighing on consumption.
Sales rose 6 percent in local currencies in March compared with 23 percent growth in the three months through February, H&M said Thursday. The shares fell as much as 3 percent in morning trading.
The war and a resurgence of COVID-19 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 percent 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 percent 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 percent of 12-month sales from 18.7 percent 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.
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