H&M profit outlook clouded by Russia closure

H&M recently said it would temporarily close its stores in Russia, expressing concerns about the 'tragic developments in Ukraine'.

H&M is seen swinging back to profit in its December-February quarter as pandemic effects ease, though the closure of its Russian stores and the economic fallout from war in Ukraine has made the company's outlook more uncertain.

Analysts expect the world's second-biggest fashion retailer to report a pre-tax profit of 1.04bn crowns (€101.5m) for its first quarter when it posts results on Wednesday.

Sales were up 23% year-on-year, H&M has reported, but down 11% from two years earlier, before the pandemic.

The year-ago period, when nearly half of stores closed due to the second wave of the pandemic, H&M made a 1.39bn crown loss. Two years ago, it made a 2.5bn crown profit.

Alongside many other companies reacting to Russia's invasion of Ukraine in late February, H&M recently said it would temporarily close its stores in Russia, expressing concerns about the "tragic developments in Ukraine".

Russia was H&M's sixth-biggest market with 4% of sales in the fourth quarter of 2021. While the group is reducing its store count overall, it has been increasing its number of stores in Russia, to 170 at the end of November.

Analysts have been lowering full-year earnings estimates for H&M recently.

"For H&M we could see further downside risk to estimates if H&M decides to pull out of Russia/Ukraine permanently due to the conflict there, or this leads to further upwards pressure on inflation and commodity prices," RBC analysts said.

• Reuters