Fashion retailer H&M sees dollar headwinds easing by end of year

Swedish fashion retailer H&M has said headwinds from the strong dollar will ease by the end of 2016.

The company yesterday said its first-quarter profit fell less than analysts expected, boosting its shares by 5.5%.

The company also said it would open its 4,000th store this month, in New Delhi — a doubling of its store base from 2,000 in 2010 — and will bring online sales to 11 new countries this year, including Ireland and Japan.

Earnings before interest and tax (EBIT) were 3.27bn kronor (€353,000) in the three months to the end of February, H&M said yesterday.

Analysts predicted 3.21bn kronor. The gross margin narrowed to 52% from 55.2%, also exceeding estimates.

The fast-fashion retailer gets about 80% of its products from Asia, where the greenback’s strength has inflated the cost of purchases of garments, as many currencies in the region are linked to the dollar.

That effect should disappear by the fourth quarter, the company said.

“This was clearly a very difficult quarter even if it wasn’t quite as difficult as expectations,” Anne Critchlow at Societe Generale, said.

Slowing sales have also forced H&M to discount more merchandise.

Sales rose 2% including in local currencies in March, H&M said, a soft start to its quarter due to unfavourable weather and the early falling of Easter.

Bloomberg