1/ H&M's cost-cutting measures contribute to a strong Q2 performance with an operating profit of ~ 4.74 Bn Swedish crowns.
2/ H&M closed a total of 303 stores across its brands in the year to May 31, with new store openings mainly to be in "growth markets" while closing stores in established markets.
3/ In addition, effective inventory management leads to a significant decrease in inventory levels, positively impacting the company's financials.
4/ H&M's inventory was at 16.7% of rolling 12-month sales on May 31, down from 19.2% in 2022.
Estimated Cost Savings: Unquantifiable. ~$300 Mn. - ~$600 Mn. per annum 💰💸
Cost Optimisation Impact:
1/ Effective cost management strategies enable H&M to navigate challenges, such as high raw material and freight costs, resulting in improved operational efficiency.
2/ H&M's strong performance and focus on higher-priced brands may pose a competitive challenge to other fashion retailers, particularly those in the fast-fashion segment – Zara, Inditex, etc. Competitors would need to adapt their strategies and offerings to remain competitive.
Company: H & M Hennes & Mauritz AB
Cost Element: Raw materials, freight, labour, inventory, marketing, overhead, and store operations.
Nature: Opex + Capex 💰📊
Cost Classification: Fixed Cost ⚖️ + Operations Overheads ⚙️
Source: June 30, 2023 | news 24| https://www.news24.com/fin24/companies/hm-shares-jump-11-as-summer-collection-boosts-profit-20230629
Total Selling Expenses 2022 -> $ 8.73 Bn (SEK 94.5 Bn)
Total number of stores 2022 -> 4,465
Selling Expense for 303 stores -> $ 8.73 Bn / 4465 * 303 = $ 592 Mn
But selling expenses include corporate expenses as well (assuming half) -> $ 592 Mn * 50%
Reach us if you have any concerns regarding cost management accounting issues in your organization.
Partner, Chandra Wadhwa & Co. (Cost Accountants) | B.Com, FCMA, ACA, DISA | Certified SAP-CO Consultant | Executive Program on Management and Finance (IIM, Ahmedabad)
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