H&M sees profits boom on strong spring sales

Swedish cheap-and-chic fashion giant H&M on Wednesday posted a net profit up 22.5 percent in the second quarter, easily beating expectations and boosting its share price.

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For the March-May quarter, H&M posted a net profit of 5.22 billion kronor ($746 million), well above the expectations of analysts polled by the Dow Jones Newswires, who had anticipated a net profit of 4.84 billion kronor for the quarter.

Following the news, the company saw its share price leap 2.5 percent in early morning trading on a Stockholm stock exchange up 0.2 percent.

H&M also saw a its sales, excluding VAT, jump 15 percent in the second quarter, to 31.66 billion kronor from 27.63 billion during the same period a year earlier, the company said in its earnings report.

"The spring collections have been well received by our customers as shown by our increased market share in a fashion retail market that continues to be challenging," company chief executive Karl-Johan Persson said in the statement.

The company, which in recent quarters had posted disappointing results due to high purchasing costs, said Wednesday that "overall, the effects of the earlier significantly negative external factors, such as the cotton price, were more or less neutralized."

H&M, which had seen its gross margin shrink in the first quarter, posted a stable margin in the second quarter of 61.7 percent, which was good news, analysts said.

"They give a positive surprise on the gross margin. All in all, these are pretty good figures," Sydbank analyst Nicolaj Jeppesen told Dow Jones Newswires.

H&M said it was continuing to expand rapidly, with plans to open 275 new stores during the full year 2012, including in five new markets: Bulgaria, Mexico, Latvia, Malaysia and Thailand.

The company counted 2,575 stores worldwide at the end of May, and said "China, the US and the UK are expected to be the largest expansion markets for H&M in 2012."

"There are also still great opportunities for expansion in markets such as Germany, France and Italy," it added.

The Swedish retailer said it also planned to launch online sales in the United States -- "the world's largest online market" -- later this year.

One of H&M's main competitors, Spanish Zara, has also said it will launch online sales in the United States in the second half of the year.

H&M meanwhile said its other brands, COS, Monki, Weekday and Cheap Monday, as well as its H&M Home furniture and interior store, were also continuing to expand, and confirmed that it would open a brand new chain next year under the name & Other Stories.

AFP/The Local
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