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Gloucestershire Business News

H&M closing some UK stores following profit slump

High street giant H&M is closing some UK stores due to a "rapid change in customer behaviour".

It comes as the chain's profits were almost wiped out in the September to November quarter by "negative external factors" including the war in Ukraine.

The retailer, which has a branch in Gloucester, has closed its stores in Burton and Maidenhead and announced stores in Hartlepool and the Isle of Wight will also shut.

It has not confirmed whether further stores were earmarked for closure.

A spokesperson for H&M UK & Ireland said: "During the last few years, we have seen a rapid change in customer behaviour that we cannot ignore. We continuously need to evaluate and develop our business to meet our customers' needs and offer the best possible shopping experience, whether it's online or in our physical stores. This means that we sometimes need to close stores."

It comes after the retail giant saw a plummet in fourth quarter profit which it said was due to one-time costs as a result of winding down trading in Russia, Belarus and Ukraine and its cost and efficiency programme.

For the three months to November 30, 2022, H&M reported an operating profit of SEK 821m (£64.4m), down year on year for the quarter.

The retailer also posted a gross profit of SEK 31bn (£2.43bn), resulting in a gross margin of 49.7% - down from 55.2% in the same period last year.

Helena Helmersson, CEO of H&M, said: "Our decision to wind down the business in Russia,which was an important and profitable market, has had a significant negative impact on our results.

"The hikes in raw materials and freight costs combined with a historically strong US dollar resulted in extensive cost increases for purchases of goods.

"Rather than passing on the full cost to our customers, we chose to strengthen our market position further.

"On top of this there were increased energy costs as well as a one-time charge for the cost and efficiency programme that was initiated at the end of the year.

"The combined effect of these factors amounted to a negative impact on profit in the fourth quarter totalling around SEK 5 billion compared with the same quarter last year."

H&M group is the world's second-largest fashion retailer after Zara, with around 4,664 stores in 77 countries and 155,000 staff.

The company said trading in its new financial year has started well despite challenging external factors with sales from December 1 to January 25 rising by 5% in local currencies.

Ms Helmersson added: "Combined with our investments and efficiency improvements, there are very good prerequisites for 2023 to be a year of increased sales, and improved profitability. Thus, our goal of achieving a double-digit operating margin for full-year 2024 remains in place."

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