Popular fashion lines boost Hennes and Mauritz

Swedish mass fashion retailer Hennes and Mauritz (H and M) reported soaring third-quarter profits on Wednesday, boosted by a collection that was a hit with shoppers, limiting the need for price reductions.

Net profits during the period June-August rose by 35.6% to 2.16 billion kronor (230.4 million euros, 277 million dollars), up from 1.59 billion kronor a year ago.

Sales including VAT rose by 18.2% during the period to 17.8 billion kronor from 15.1 billion a year ago. Excluding VAT, sales rose by the same amount to 15.2 billion.

“Due to a well-balanced stock-in-trade the spring/summer season has ended with a lower price reduction level compared to last year,” H and M said in a statement.

“The sales of autumn garments have started well during the year,” it added.

The results were also bolstered by improved cost efficiency and lowered quota costs.

The price of the H and M share initially rose by 2.4% on the strong figures to 276 kronor, but it later fell back to 271.50 kronor as analysts said they did not believe the 58.8% gross margin level could be sustained.

“The result was better than expected because the gross margin was so strong. But it’s been driven by short-term factors that won’t be there next year, such as easy comparisons in terms of discount rates, less quota costs, currencies, and lower purchasing costs in general because of China,” Mattias Karlkjell at ABG Sundall Collier told AFX News.

“Once the gross margin increase is behind us then earnings momentum will clearly slow down, that’s the key thing,” he said.

H and M recalled that it was affected by a textile dispute between the European Union and China during the quarter and some of its garments made in China were blocked from entering the EU. These articles have now been delivered to stores, it said.

“The re-establishment of the quota regulations makes the buying process somewhat more difficult and can in a shorter perspective have a negative influence on the gross profit, but in the longer perspective it will have no effect on the group’s result,” it said.

H and M made headlines last week when it dropped British supermodel Kate Moss from a pre-Christmas advertising campaign after allegations that she took cocaine.

Photos of Moss, which had already been shot for the youth fashion chain’s autumn-winter collection, designed by Stella McCartney, will be replaced by a different campaign when it is launched on November 10th.

The company has not commented on any possible commercial consequences ensuing from the scandal.

The group said it had 1,134 stores at the end of the period. It plans to open 70 stores in the fourth quarter, most of them in North America but 14 in Germany.



H&M competitor to sponsor Sweden’s Olympic team

Six months after establishing itself in Stockholm, Japanese clothing brand Uniqlo has announced it will sponsor Sweden’s athletes at the 2020 Olympics.

H&M competitor to sponsor Sweden's Olympic team
Anna Hasselborg of Sweden's curling team tries out new kit supplied for the country's athletes by Uniqlo. Photo: Henrik Montgomery/TT

The clothing chain, one of the world’s fastest-growing retail companies, is also set to open more stores in the Scandinavian country.

“Swedes are so sophisticated and warm-hearted,” Uniqlo Europe CEO Taku Morikawa said, stressing how welcome his company has been made to feel.

Morikawa was in Sweden to present the partnership between Uniqlo and the Swedish Olympic Committee at an event at Uniqlo’s store on Hamngatan in Stockholm.

Sweden’s athletes wore teamwear supplied by H&M at the last two Olympic Games.

The Stockholm store, Uniqlo’s first in the Nordic region, opened its doors in August 2018. An expansion is now planned on the Swedish market, although Morikawa declined to reveal where.

“We definitely have plans to open more stores here,” he said.

A store will also open in Danish capital Copenhagen in the coming spring as Uniqlo’s holding company Fast Retailing continues its global expansion.

Sales figures in Sweden’s clothing retail sector have seen a downward trend in recent years, with an exception in 2015.

H&M is usually cited as one of Uniqlo’s main competitors.

The impact of a new player on an already-competitive market is difficult to predict, according to the Swedish Trade Federation (Svensk Handel).

“Locally, competition is sharpened, but competition is already fierce. I would be inclined to say that this type of partly new concept store can, instead, help to revitalise the physical retail sector for clothing,” the association’s head economist Johan Davidson said.  

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