Expensive retreat
H&M’s balance sheet messed up in Russia business
01/27/2023 1:44 p.m
Many companies complain about high prices for electricity and gas because of the war. Those who are further dependent on Russia are hit even harder. After the start of the Russian invasion of Ukraine, H&M withdrew from Putin’s empire – and felt it clearly.
Rising production costs and energy prices as well as the withdrawal from Russia have ruined the balance sheet of the Swedish textile giant H&M. The company reported a 68 percent drop in net profit for the full year 2022 to around 321 million euros. In the fourth business quarter from September to November, the bottom line was an unexpectedly high loss of around 77 million euros.
H&M is one of a number of western companies that withdrew from Russia after the invasion of Ukraine. “After careful consideration, given the current situation, we consider it impossible to continue our business in Russia,” said H&M CEO Helena Helmersson last summer.
Already at the beginning of March – and thus a few days after the Russian invasion of Ukraine – the group announced that it would discontinue its sales operations in Russia until further notice. Now Helmersson explained that the decision to leave this “important and profitable market” had a heavy impact on the results. The company closed a total of 336 stores worldwide, including 175 in Russia and Belarus.
H&M was also impacted by the strong US dollar and high shipping, raw material and energy costs. Instead of passing these costs on to customers, H&M decided to “further strengthen its own market position,” said the company boss. The start of the new year is promising – sales from December to January increased by five percent. While external factors are “still challenging,” Helmersson said, they are “moving in the right direction.”