Fashion retailer Hennes & Mauritz reported second quarter net profits (to May 31) fell by 21.3% on a year earlier vs. analyst expectations of a 15.8% decline, S&P Global Market Intelligence reports. Supply chain problems, specifically an “imbalance in its merchandise assortment and inventories carried over from prior quarters” were in part to blame.

A longer-term decline in demand may also be to blame. Panjiva data shows U.S.-inbound volumes of H&M products fell by 8.5% in the three months to April 30 (merchandise sold through May 31). A turnaround may take a while to arrive with imports in May and June down a further 11.7% on a year earlier based on preliminary data.

Chart shows U.S. seaborne shipments associated with Hennes & Mauritz. Lower panel indicates change vs. a year earlier.  Source: Panjiva

One risk that H&M shouldn’t have to face is supply chain disruptions from escalating trade spats centered on the U.S. – so far American duties do not cover apparel as outlined in Panjiva research of June 19. Its supply chain for the U.S. market does have a significant component from China (26.4% of imports in the last 12 months) led by winter wear though there will likely be alternatives available from suppliers in Bangladesh (30.5%) and Indonesia (6.5%).

Chart segments U.S. seaborne shipments associated with Hennes & Mauritz by shipment origin and product (HS-4) for the 12 months to June 24, denominated in TEUs.  Source: Panjiva