Stockholm, Sweden – H&M reported on Friday 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 program.
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.