H&M earnings hit by Russia exit, soaring costs

H&M a big drop in profits in 2022, with an unexpected loss in the fourth quarter as the Swedish fashion retailer exited Russia and faced soaring production costs.

H&M was among a slew of foreign companies that shipped out of Russia last year after Moscow invaded Ukraine and Western nations imposed sweeping sanctions on the country.

"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," chief executive Helena Helmersson said in a results statement. The company was also hit by a historically strong dollar and increases in the costs of freight and raw materials.

"Rather than passing on the full cost to our customers, we chose to strengthen our market position further," Helmersson said. H&M also dealt with higher energy prices, which soared across Europe following Russia's war in Ukraine, and a cost-cutting programme.

The group posted a 68 percent drop in net profit in 2022 to almost 3.6 billion Swedish kronor ($346 million). It reported a loss of 864 million Swedish kronor ($84 million) in the September-to-November period.

But the company is more upbeat about 2023, with sales up five percent in the December-January period.

"Sales in the new financial year have started well. The external factors are still challenging, but are moving in the right direction," Helmersson said.

European stock markets slid Wednesday as investors awaited key company earnings and economic growth data in the United States.

Traders "are waiting for some direction from across the Atlantic as US earnings season gets into full swing and key economic announcements loom at the end of the week", said AJ Bell investment director Russ

Mould. Investors will later track the latest results from electric carmaker Tesla, headed by Twitter owner and billionaire Elon Musk.

That follows this week's earnings gloom from US corporate titans Microsoft and Johnson & Johnson. "Traders are keen to see how Musk's primary business performed over the period," added Tickmill analyst James Harte. Markets will then absorb fourthquarter economic growth data for the world's biggest economy on Thursday.

Asian equities fluctuated as traders in several countries returned from the Lunar New Year break with recession fears still causing concern.

While markets have enjoyed a strong start to the year as a slowdown in inflation gives central banks room to temper their interest rate hikes, focus is now turning to the economic impact of last year's increases. Worries about the growth outlook, and the impact of higher rates on company profits, are also offsetting optimism over China's reopening from years of zero-Covid measures.

Data showing a slight improvement in US factory and services activity was unable to settle nerves, with figures still showing the sectors in contraction.