• Q2 profit fell 11% to SEK4.66bn
  • Sales edged down 0.1% to SEK31.64bn
  • H1 profit declined 10.6% to SEK7.11bn

Swedish fashion retailer H&M Hennes & Mauritz has blamed poor weather and negative currency exchange for an 11% decline in second-quarter profit.

The Stockholm-based retailer today (19 June) said profit stood at SEK4.66bn (US$727.2m) for the quarter to 31 May, compared to SEK5.22bn the same period last year.

Group sales, excluding VAT, edged down 0.1% to SEK31.64bn from SEK31.66bn last year. In local currencies, sales rose 5%, while comparable store sales fell 4%.

Increased markdowns negatively affected gross margin by 0.9 percentage points year-on-year.

Over the first half, profit declined 10.6% to SEK7.11bn from SEK8bn the prior year. Sales climbed 1% to SEK60bn from SEK59.49bn last year but declined 5% in local currencies. Comparable store sales fell 4%.

"This quarter has been marked by substantial negative currency translation effects, which have had a negative impact on both sales and profits in SEK," said CEO Karl-Johan Persson.

"Although sales remained strong in Asia, overall sales were not satisfactory mainly due to the continued challenging situation for the fashion retail industry as well as unfavourable weather in March and a couple of weeks into April in many of our big markets," he added. 

Sales in June, however, have got off to a good start by increasing 14% year-on-year in local currencies. 

Looking forward, the retailer said it will continue with its investments in IT, online sales, new brands and broadening the range.

Persson said: "Although most of these long-term investments have not yet generated revenues, we see them as wise and necessary - all in order to build an even stronger H&M. The fantastic response that our new brand & Other Stories has had from customers is one example of an investment that has already borne fruit."

Commenting on the results, Bank of America Merrill Lynch analyst Richard Chamberlain said the results were not great but the retailer is probably past the worst.

"We continue to believe that H&M's size and maturity have become potential constraints to growth, however we see potential for newsflow to improve later this year if trading conditions continue to normalise and due to the US e-commerce launch in August."