The strengthening USD is asking for sourcing in CNY

The strengthening USD is asking for sourcing in CNY

Swedish worldwide fashion retailer H & M is contemplating to source in the future its clothes in CNY in order to protect its purchasing costs against the strengthening USD

The company’s management states that many of the competitors have started to pay directly in CNY and since China is making efforts to loosen its grip on the currency such action becomes even easier. More and more Chinese suppliers are accepting CNY payments. Today there are a lot of fees involved and this is beneficial mostly to the banks. In any case H & M is considering all options to minimise currency risks.

H & M sources the majority of its clothes in Asia and about 80 % of its total purchasing costs are in USD. On the other hand it is selling around 60 % of its clothes in EUR or currencies pegged to the EUR and therefore the relation between EUR and USD is of importance.

H & M’s sales increased in the fiscal quarter per End of May from SEK 27.63 billion to SEK 31.66 billion and operational profit was up from SEK 5.6 billion to SEK 6.89 billion and sales at stores open more than a year increased by 2 %. Also the net profit rose from SEK 4.26 billion to SEK 5.22 billion (around USD 749.07 million), The gross margin was held at 61.7 % thanks to lower cotton prices and a weaker USD at the time. But some experts doubt if this level is continuing since the USD against the EUR became stronger and this will also have a probable negative impact on purchases unless some effective measure as described above will take place.

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