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H&M Will Not Raise Prices, Will Absorb Wage and Organic Costs

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H&M is rewriting the retail playbook. In a BSR conference in New York Thursday, H&M chief executive officer Karl-Johan Perssons said the fashion retailer is not raising its prices. Instead, the company is absorbing the costs that comes with using organic cotton for some of its products, paying higher wages to some of its garment workers in areas like Bangladesh and investments in its factories to ensure safe working conditions and facilities, Bloomberg reported.

Perrson said that many customers are unwilling to pay more for good quality. As a result H&M’s margins are feeling the effects. Bloomberg data shows that H&M’s profit margin was 13.34% in 2013 and it dropped to 13.29% in 2014. Next year, it is expected to dip to 13.26%.

The declines are minor, however, Persson said, “We have to stand up to the pressure from investors and analysts.”

During the conference Persson noted that he wants H&M to stay competitive and is not calling for less consumption, Bloomberg reported. “Consuming less of everything could have bad consequences for the economy. But we want people to consume from responsible companies,” he said.

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