In announcing a 43 percent increase in pretax profits for 2001, H&M, the multinational apparel retailer based in Sweden, said it would cut the number of stores to open in the U.S. over the next 12 months to 12 from about 30.
“The somewhat lower expansion rate than originally planned for the U.S.A. is due to the uncertainty of the American market after Sept. 11, 2001, as well as to our ambition to more rapidly achieve higher efficiency in existing stores,” said H&M in a statement.
H&M operates 30 units in the U.S., a market it first entered two years ago. H&M had planned to have 85 U.S. units by 2003.
Carl-Henric Enhorning, head of investor relations, stressed that H&M remained committed to America. “This is a short-term slowdown,” he said during a conference call with analysts. “This year, we’re committed to increasing efficiency there, and maybe we’ll step back up next year.”
H&M’s pretax profits for 2001 surged $538 million, slightly outperforming analysts’ expectations. Revenue for the year totaled $4.4 billion.
“The real news is that they are reducing their rollout in the U.S.,” said Fredrik Liljewall, analyst at UBS Warburg in Sweden. “I think they’re saying that we won’t see growth in the near future.”
H&M first signaled that sales were slowing earlier this month, reporting December growth of only 10 percent — well below market expectations of about 20 percent. Enhorning declined to provide sales figures for January, but suggested that sales performance had been stronger in Europe than in the United States.
“We are in a different commercial environment than before,” said Enhorning. “There is still uncertainty.”
He said H&M expected to turn a profit this year in Spain and France, markets entered within the last three years. But in the U.S., Enhorning said it was “not certain” it would turn a profit next year. “We will improve over the next year; otherwise, we would not be learning.”
Looking ahead, chief executive officer Rolf Eriksen said on a conference call that the next year would be dedicated to increasing profitability. He suggested that H&M saw potential in new markets, but that it would not enter any in 2002.