H&M (OTCPK:HNNMY) was hit by a strong dollar and rising costs, squeezing profits for the fourth quarter, according to its annual earnings report.

The report released on Friday reflected a significant contraction in quarterly profits for Q4 as compared to the same period in 2021. The Swedish retailer reported SEK 821M in operating profits for the period, well below the SEK 6.26B notched in Q4 2021 and stunning analysts that had anticipated profits to be four times the figure reported.

“The lower profit in the fourth quarter when compared with the same quarter in the previous year is mainly explained by the negative external factors, loss of the operating profit previously contributed by Russia and the one-time cost of the cost and efficiency programme,” the company report explained. “As communicated previously, the results were impacted by a one-time cost of SEK 836 m for the cost and efficiency program.”

CEO Helena Helmersson added that a strong dollar and escalating cost inflation continue to weigh on results. The company decided to take the hit rather than pass on costs to consumers in Q4.

“The hikes in raw materials and freight costs combined with a historically strong US dollar resulted in extensive cost increases for purchases of goods,” she said. “Rather than passing on the full cost to our customers, we chose to strengthen our market position further. On top of this there were increased energy costs as well as a one-time charge for the cost and efficiency program that was initiated at the end of the year.”

Stockholm-listed shares of H&M (OTCPK:HNNMY) slipped over 4% in afternoon trading.

Read more on the details of the report.