Profit hike for H&M as clothes fly off shelves

Swedish budget clothing retailer has sidestepped a downward global sales trend to report a healthy second quarter net profit.

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H&M said net earnings in the three months to May rose 6.0 percent from a year earlier to 4.19 billion kronor ($524 million).

"Sales in new markets for H&M, Japan and Russia, beat our expectations," the company said in a statement.

Its spring collection had done well, it said, with sales in local currency terms up 8 percent.

For its first quarter to February, the group previously reported a 12.4 percent fall in net profit to 2.57 billion kronor, reflecting a weaker Swedish currency, but sales increased 18 percent to 23.3 billion kronor.

"The spring collections have been well received by the customers," the company said in a statement. "Sales excluding VAT increased by 23.0 percent" to 26.5 billion kronor.

The company also said sales in its two new markets, Japan and Russia, had "surpassed expectations."

For its first quarter to February, the group previously reported a 12.4 percent fall in net profit to 2.57 billion kronor, reflecting a weaker Swedish currency, but sales increased 18 percent to 23.3 billion kronor.

The company said the global economic downturn had weakened demand in in all of its markets, but especially in Spain, the United States and the Nordic countries.

Germany, H&M's biggest market in terms of revenue, posted 14.8 billion kronor in overall sales in the first six months, compared to 11.9 billion kronor a year before.

In the first half of H&M's financial the company posted sales excluding VAT of 49.83 billion kronor -- an increase of 21 percent from the same period 12 months ago.

Despite tough economic conditions, H&M said it opened 93 new stores worldwide in the first quarter. It added 12 stores in Germany bringing its total there to 346 shops, two in the United States where it now has 171 and seven in Sweden which brings its total to 156 stores.

The company now has 1,822 stores open worldwide, compared to 1,593 the year before.

H&M, the world's second-biggest clothing retailer behind Spanish group Inditex which owns the Zara chain, said it was optimistic about the future.

"H&M remains positive towards the future expansion and the company's business opportunities," it said.

The company said it planned to open another 159 shops worldwide by the end of its fiscal year November 30th.

At 11.53 GMT, H&M's share price was up 1.75 percent to 377.00 kronor on the Stockholm exchange in market down by 0.72. percent.