In recent fashion news, Swedish fashion retailer, Hennes & Mauritz AB have reported that their profits fell 30% in the first quarter of the year. This fall was due, they explain, to rising cotton prices and negative currency exchange effects.
Net profits, this Stockholm-based company explained, dropped from 3.74 billion kroner during the first quarter of 2010 to 2.62 billion kroner during the first quarter of 2011.
While the typical consumer probably doesn’t consider the factors that lead to better or worse sales, this quarter was definitely impacted by unusual issues. The decline in profits reflects a significant rise in cotton prices, increased transportation costs and less spare capacity. However, H&M’s CEO Karl-Johan Persson explained that, “Instead of passing on these cost increases to customers, we chose to strengthen our price position in order to build further on our strong market position for the long term.”
The first quarter problems were also due to a number of other factors. Particularly bad weather this winter caused a number of stores to temporarily close during heavy snowstorms; in addition, with the world economic issues many consumers are showing restrain in their purchases; furthermore, may consumers are searching for discounts rather than purchasing top name brand items.
Good News on the Horizon
The good news is that H&M is still showing impressive growth in certain areas. At the end of February, they had 2,212 stores, which is an increase of 220 stores from last year. They also recently opened their first two outlets in Bucharest, Romania and they plan to open 97 new stores worldwide soon.