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Swedish fashion giant’s profits drop by millions

Swedish fashion giant Hennes and Mauritz (H&M) announced on Tuesday that its annual net profit fell by millions of dollars in the 2015-16 financial year.

Published: 31 January 2017 10:05 CET

Swedish fashion giant's profits drop by millions

An H&M store in New York promoting January sales. Photo: Mark Lennihan/AP

H&M explained that its annual net profit dropped by 11 percent due to higher purchasing costs from the rising dollar.

The group, which opened 427 new stores during that year, said its profit fell to 18.636 billion kronor (1.972 billion euros, $2.109 billion) in its 2015/2016 financial year, ending on November 30.

The profit drop of nearly two billion kronor ($226 million) was also a result of “an increase in discounts” after a cold spring in Europe.

“For fashion retail in general, 2016 was at the same time a challenging year in which various external factors – including geopolitical events – had a negative impact on retail trade in many markets,” the company's CEO Karl-Johan Persson said in a statement.

“This was particularly visible in France, Germany, Switzerland and Italy as well as in the US and in China,” he added.

For the coming year, the group plans to open 430 new stores and settle in five new markets: Kazakhstan, Colombia, Iceland, Vietnam and Georgia.

Measured in local currencies, sales jumped by seven percent to 223 billion kronor ($25 billion) in 2015/2016.

For 2016/2017, H and M aims to raise its turnover from shops and online sales combined by 10 to 15 percent.

On the Stockholm Stock Exchange, the group's shares surged nearly five percent in early business, vastly outperforming the overall market which was up by 0.8 percent.

The apparel giant has 114,586 employees worldwide, including nearly 9,000 in Sweden.

OPINION: Are tips in Sweden becoming the norm?

The Local’s guide to tipping in Sweden is clear: tip for good service if you want to, but don’t feel the pressure: where servers in the US, for instance, rely on tips to live, waiters in Sweden have collectively bargained salaries with long vacations and generous benefits.

SEE ALSO: What’s the tipping etiquette in Sweden?

But there are signs that this is changing, and the change is being accelerated by card machines. Now, many machines offer three preset gratuity percentages, usually starting with five percent and going up to fifteen or twenty. Previously they just asked the customer to fill in the total amount they wanted to pay.

This subtle change to a user interface sends a not-so-subtle message to customers: that tipping is expected and that most people are probably doing it. The button for not tipping is either a large-lettered ‘No Tip’ or a more subtle ‘Fortsätt’ or ‘Continue’ (it turns out you can continue without selecting a tip amount, but it’s not immediately clear to the user).

I’ll confess, when I was first presented with this I was mildly irked: I usually tip if I’ve had table service, but waiting staff are treated as professionals and paid properly, guaranteed by deals with unions; menu prices are correspondingly high. The tip was a genuine token of appreciation.

But when I tweeted something to this effect (a tweet that went strangely viral), the responses I got made me think. Many people pointed out that the restaurant trade in Sweden is under enormous pressure, with rising costs, the after-effects of Covid and difficulties recruiting. And as Sweden has become more cosmopolitain, adding ten percent to the bill comes naturally to many.

Boulebar, a restaurant and bar chain with branches around Sweden and Denmark, had a longstanding policy of not accepting tips at all, reasoning that they were outdated and put diners in an uncomfortable position. But in 2021 CEO Henrik Kruse decided to change tack:

“It was a purely financial decision. We were under pressure due to Covid, and we had to keep wages down, so bringing back tips was the solution,” he said, adding that he has a collective agreement and staff also get a union bargained salary, before tips.

Yet for Kruse the new machines, with their pre-set tipping percentages, take things too far:

“We don’t use it, because it makes it even clearer that you’re asking for money. The guest should feel free not to tip. It’s more important for us that the guest feels free to tell people they’re satisfied.”

But for those restaurants that have adopted the new interfaces, the effect has been dramatic. Card processing company Kassacentralen, which was one of the first to launch this feature in Sweden, told Svenska Dagbladet this week that the feature had led to tips for the average establishment doubling, with some places seeing them rise six-fold.

Even unions are relaxed about tipping these days, perhaps understanding that they’re a significant extra income for their members. Union representatives have often in the past spoken out against tipping, arguing that the practice is demeaning to staff and that tips were spread unevenly, with staff in cafés or fast food joints getting nothing at all. But when I called the Swedish Hotel and Restaurant Union (HRF), a spokesman said that the union had no view on the practice, and it was a matter for staff, business owners and customers to decide.

So is tipping now expected in Sweden? The old advice probably still stands; waiters are still not as reliant on tips as staff in many other countries, so a lavish tip is not necessary. But as Swedes start to tip more generously, you might stick out if you leave nothing at all.

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