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Following Pre-Pandemic Level Profits, Supply Issues Hit Sept. Sales Of H&M

Following Pre-Pandemic Level Profits, Supply Issues Hit Sept. Sales Of H&M
Following its better than expected earnings that surpassed its profits for pre-pandemic levels in the June-August quarter, the sales for September for fashion retailer H&M' were hindered by supply chain interruptions, the Swedish company said on Thursday.
Variations to the international economy caused by the Covid-19 pandemic have disrupted global supply chains, resulting in a dearth of commodities as well as shortages in containers, storage, and drivers for trucks ferrying goods, as well as an increase in shipping prices.
"Sales in September 2021 were slightly higher than in the corresponding month the previous year in local currencies, even though demand was not able to be fully met because of disruption and delays in product flow," H&M said.
The company's constraints were mostly in manufacturing, transportation, and ports, said  H&M's chief executive, Helena Helmersson, while addressing investors and the media.
She stated that the situation was improving at the supplier level, but that H&M was bracing for additional delivery delays in the current quarter.
The world’s second-largest apparel retailer’s fiscal third-quarter pretax earnings increased 158 percent year on year to 6.09 billion Swedish crowns. Refinitiv surveyed analysts, who predicted a 5.05 billion crown profit on average.
Profit increased by 22% compared to the same quarter in 2019, before the pandemic.
"The H&M group’s increase in profit for the quarter is mainly a result of well-received collections with more full-price sales, lower markdowns, and good cost control," Chief Executive Helena Helmersson said in a statement.
Compared to 180 at the beginning of June, about 50 of its 5,000 shops are presently shuttered, H&M stated.   
Most stores were shuttered at the peak of the COVID-19 epidemic owing to lockdowns and pandemic related restrictions.
H&M said a favorable US dollar exchange rate offset significantly increased costs for shipping and raw materials in the third quarter but warned: "As the positive U.S. dollar effect subsides and the high shipping and raw materials prices remain, the overall market situation for purchasing costs in the fourth quarter will gradually become less positive."
Cotton prices are rising due to high demand for the material in China and harsh climate in major producing regions.
In November, the company recommended a dividend of 6.50 crowns per share for 2020. After failing to propose a dividend at its annual general meeting in May, it stated in July that the chances of paying one in the autumn were extremely strong.
Inditex, the owner of Zara, reported quarterly earnings above pre-pandemic levels earlier this month.
Helmerssom told analysts and the media that the group's status in China remained complicated, citing a response after statements made in 2019 concerning workers' rights in the Xinjiang area.

Christopher J. Mitchell

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