H&M sees profit margins hit by rising clothing worker wages

Source:Reuters-Global Times Published: 2014-3-28 0:53:03

A drive to increase wages for Asian clothing workers is likely to hit profit margins at world No.2 fashion retailer Hennes & Mauritz (H&M) as weak consumer demand and stiff competition make it hard to pass on the cost to shoppers, it said Thursday.

The Swedish group issued its warning after missing first-quarter profit forecasts, due in part to investments aimed at catching up with rivals in fast-growing online fashion sales.

Asian factories, which churn out the bulk of clothes for the world's budget fashion market, have come under international pressure to improve wages and working conditions following a string of accidents.

Late last year, factory owners in Bangladesh agreed to a minimum wage of $68 a month, up from $38.

Hennes & Mauritz, which buys about 80 percent of its stock from Asia and is one of the biggest customers of Bangladeshi garment factories, said rising wages in that country and elsewhere were likely to hit profit margins.

"For purchases made now, wage increases in Bangladesh, Cambodia and China have a negative effect because we are not charging our customers higher prices," Chief Executive Karl-Johan Persson told Reuters. "That will affect gross margins negatively, all else equal, ahead."

H&M, which says it supports paying clothing workers a living wage and has criticized governments for moving too slowly, has recently been exploring options to buy garments from Africa.

Posted in: Companies, Fashion

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