first_img whatsapp KCS-content Show Comments ▼ Wednesday 29 September 2010 10:38 pm Share Read This NextRicky Schroder Calls Foo Fighters’ Dave Grohl ‘Ignorant Punk’ forThe WrapCNN’s Brian Stelter Draws Criticism for Asking Jen Psaki: ‘What Does theThe WrapDid Donald Trump Wear His Pants Backwards? Kriss Kross Memes Have AlreadyThe Wrap’Sex and the City’ Sequel Series at HBO Max Adds 4 More ReturningThe WrapHarvey Weinstein to Be Extradited to California to Face Sexual AssaultThe WrapPink Floyd’s Roger Waters Denies Zuckerberg’s Request to Use Song in Ad:The Wrap’The View’: Meghan McCain Calls VP Kamala Harris a ‘Moron’ for BorderThe WrapNewsmax Rejected Matt Gaetz When Congressman ‘Reached Out’ for a JobThe Wrap2 HFPA Members Resign Citing a Culture of ‘Corruption and Verbal Abuse’The Wrapcenter_img by Taboolaby TaboolaSponsored LinksSponsored LinksPromoted LinksPromoted LinksYou May LikeMisterStoryWoman Files For Divorce After Seeing This Photo – Can You See Why?MisterStoryTotal PastThe Ingenious Reason There Are No Mosquitoes At Disney WorldTotal PastNoteabley25 Funny Notes Written By StrangersNoteableyMoneyPailShe Was A Star, Now She Works In ScottsdaleMoneyPailSerendipity TimesInside Coco Chanel’s Eerily Abandoned Mansion Frozen In TimeSerendipity TimesBrake For ItThe Most Worthless Cars Ever MadeBrake For ItBetterBe20 Stunning Female AthletesBetterBemoneycougar.comThis Proves The Osmonds Weren’t So Innocentmoneycougar.comautooverload.comDeclassified Vietnam War Photos The Public Wasn’t Meant To whatsapp H&M is a company built for recession. You can splurge on outfits for under a tenner, and it specialises in fast throwaway fashion – stocking the latest look, but making it cheap enough to ensure you return for more when it’s no longer in trend. Investors have lapped up this apparently slump-proof stock – sending its shares up 30 per cent over the past year. And while yesterday’s third-quarter results showing net profits up 23 per cent to 4.24bn Swedish kronor (SEK) and sales up 14 per cent to SEK26.89bn seem decent in spite of weak comparisons from the previous year, the fall in gross margin to 60.5 per cent for the quarter, down from 61.6 per cent a year ago and from 65.9 per cent in the second quarter are the first signs that it cannot avoid the impact of a sluggish economy. The other sign is that it has cut its plans for new store openings for this year to 220 from 240. With the price of raw materials and supply chain costs both rising, and favourable exchange rates diminishing H&M’s biggest attraction – its low prices – are now a millstone around its neck. H&M will find it much harder than rivals to hike its prices without losing business. H&M shares trade at 21.5 times 2011 forecast earnings, close to larger rival Inditex on 21.7, but its business model is reliant on low prices that may no longer deliver enough volume growth to compensate for the fall in gross margin from higher costs. Now is a good time to take profits, before the uncertainty becomes a reality. As Nomura said yesterday: “Recent strength reflects the past, not the future.” H&M Tags: NULLlast_img