\nH&M is taking a very large gamble to re-adjust its pricing and commercial proposition at a very difficult time for the industry\u201d<\/p>\n<\/blockquote>\n
End Quote<\/span>
\n\tSimon Irwin<\/span>
\n\tAnalyst, Liberum Capital<\/span><\/p><\/div>\nThe budget fashion firm also reported broadly flat sales at 24.5bn krona.<\/p>\n
It was the third quarter in a row that the company had fallen short of its profit and sales forecasts.<\/p>\n
Rising costs<\/span><\/p>\nA strong currency hampers international producers as it makes their goods more expensive to buy abroad and can lead to a reduction in demand.<\/p>\n
H&M was also hit by higher cotton prices and increased transportation costs.<\/p>\n
The price of cotton has risen more than 140% over the past six months, while the price of crude oil is more than 30% higher than it was 12 months ago. <\/p>\n
The world’s second-biggest fashion retailer by sales said it was aiming to increase its market share.<\/p>\n
“Instead of passing on these costs increases to customers, we chose to strengthen our price position in order to build further on our strong market position for the long-term,” said chief executive Karl-Johan Persson.<\/p>\n
Analysts had mixed views on the company’s strategy.<\/p>\n
“H&M is taking a very large gamble to re-adjust its pricing and commercial proposition at a very difficult time for the industry, said Simon Irwin from Liberum Capital. <\/p>\n
“The near-term pain from this is clear in results, however there is little evidence that it is working in terms of driving customer perceptions or driving sales.”<\/p>\n
However, Soren Lontoft Hansen from Sydbank believed the strategy was the right one. <\/p>\n
“They should be able to take market share in the long term so, from my perspective, it’s a very good strategy,” he said.<\/p>\n<\/p><\/div>\n<\/p>\n
More:
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