Hennes & Mauritz (PINK:HNNMY) — the second-largest clothing retailer in the world, commonly referred to as H&M — reported earnings well below analyst expectations in the third quarter.
Pre-tax earnings (translated from crowns) came in at $740 million — an improvement year-over-year, but short of the $870 million analysts were calling for.
The company blamed not just the poor economic conditions, but also the unusually hot season. The heat made shoppers less likely to spend money on H&M’s new autumn line, the retailer said.
H&M also struggled because of currency exchange. The company makes purchases in dollars, sells in euros and then has to translate it all back to Swedish crown, Reuters reports. So while it experienced 14% sales growth in local currencies, the strength of the dollar and crown hurt the retailer’s end numbers.
On top of that, expansion costs for more than 300 new stores also added to its sliding margins.
Still, the company has fared better than most retailers thanks to its cheap fashion and plethora of stores — 2,600 locations in 44 markets. Even in the unimpressive third quarter, the retailer still managed to gain market share.
Plus, the company should gain even more when it launches its online services in the U.S. Unfortunately, H&M is delaying that launch — originally slated for this fall — until the middle of next year.
The U.S. boasts the largest online market in the world.
The company is going forward with a new store concept called “& Other stories,” though. This debut will include a higher-priced alternative range of women’s clothing and accessories. H&M is hoping the move could give it the kickstart needed to get back on track and keep growing.
As of this writing, Alyssa Oursler did not own a position in any of the aforementioned securities.