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Swedish fashion giant H&M to cut costs as profits plummet 89% after Cavalier Russia release



By the group’s own estimate, the liquidation of the Russian operations alone reduced its profits by a total of $220 million. In the third quarter alone, its profits fell 89%.

Swedish fashion giant H&M has launched a massive program to cut costs and increase efficiency following reports of heavy losses from its decision to shut down operations in Russia.

In the third quarter, the world’s number two apparel company said its net profit fell to SEK 531 million ($47 million), down 89% from the third quarter of last year.

The group estimated that the liquidation of the Russian operations alone reduced operating profit by a total of SEK 2.5 billion ($220 million), of which SEK 2.1 billion ($190 million) was a one-time cost.

“The third quarter was largely characterized by our decision to suspend sales and reduce operations in Russia. This had a major impact on our sales and profitability, which explains half of the drop in profits compared to the third quarter of the previous year,” said CEO Helena Helmersson, quoted by media.

Higher raw material and shipping costs, combined with a stronger dollar, negatively impacted earnings by another SEK 1.5 billion ($130 million), H&M Group said. . The end result was also bogged down by a more volatile product supply, as well as higher energy prices and delivery costs.

According to Helena Helmersson, the cost-cutting program, which prioritizes efficiency, speed and flexibility, will save the company up to SEK 2 billion ($180 million) per year, starting from 2023.

H&M joined the ranks of Western companies that left Russia after the start of the special operation in Ukraine to its own detriment. With 145 million consumers, Russia had been a lucrative market since the fall of the Soviet Union in 1991. However, amid the recent standoff, the West slapped it with several rounds of sanctions that backfired dramatically and have exacerbated the energy and cost of living crises. .

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