The world’s No.2 fashion retailer H&M launched a 2 billion Swedish crown ($177 million) cost savings drive after reporting weaker-than-expected profits due to slowing consumer spending, soaring input costs, and its Russia exit.
Pretax profit in the June-August period, the Swedish fashion retailer’s fiscal third quarter, fell to 689 million crowns ($60.9 million) from 6.09 billion Swedish crowns in 2021.
The firm did not give details of where it hoped to make cost savings but said the benefits should be felt in the second half of 2023.
H&M said a 2.1 billion Swedish crown one-off cost for shutting its business in Russia, announced in July 2022, accounted for only about half of the profit drop.
Earlier this month, the firm posted lower-than-expected sales for the period as shoppers reined in spending in face of soaring energy costs and inflation but said demand had improved late in the quarter.
In Europe, H&M’s business stronghold, the Ukrainian conflict, record energy prices, and high inflation are weighing on consumer confidence, and households are cutting back on spending as they brace for tougher times.
Zara’s owner and market leader Inditex has been weathering the storm better than H&M and grew sales in its May-July quarter.