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Hennes & Mauritz, the Swedish retailer behind H&M, announced that despite a 5% growth in first-quarter profits, their margin was down, a result which they attributed to high prices of cotton, among other reasons.
“Not raising our prices to customers… has contributed to strong sales even if, combined with the increased purchasing costs, it has had a negative effect on the gross margin in the quarter,” H&M CEO Karl-Johan Persson said.
Net profit rose 4.6% from a year earlier in the first quarter but missed analysts’ expectations. Total sales in February rose 13% compared with a year earlier, while sales in stores open longer than a year were up 2%. The second quarter has started off strongly, with sales this month up to March 27 up 22%, analysts reported.
H&M made waves earlier this year by airing an ad during the Superbowl featuring David Beckham in his line of H&M underwear and little else. Persson gave no comment on whether or not the stronger profits were from their men’s underwear lines, but we think it must have had some impact.