Sweden’s Hennes & Mauritz is blaming higher cotton prices in part for its smaller-than-expected rise in quarterly earnings.
The world’s second-largest fashion retailer did enjoy strong sales, but was hit by the cost of cotton, the strength of the Swedish crown against other currencies, spending on an ambitious expansion plan and an increase in costs for other items like wages in Asia and transport.
Unlike rivals, like Zara-owner Inditex, H&M chose to hold down prices, further hurting its profits.
Pretax profit at the Swedish budget apparel firm were 3.7 billion Swedish crowns (475 million euros) in the fiscal first quarter versus a year-ago 3.5 billion and a forecast of 4.2 billion crowns in a poll of 18 analysts carried out by Reuters.
Sales at the start of the year have been strong, however, and H&M said in a statement that that trend had continued in March: “Sales have been good in most markets and have been particularly strong in big markets such as the US, UK, Germany and France, while sales have been weaker in Switzerland, Japan and Greece.”