Hennes and Mauritz Q1 profit climbs

Swedish fashion retailer Hennes and Mauritz AB posted a first quarter profit after financial items of 2.7 billion kronor, up from 2.3 billion kronor in the same period last year, supported primarily by strong sales growth.

“Increased marketing efforts have contributed to the good sales development,” H and M said.

Gross margins slipped a fraction to 56.5% from 56.8%, as sales excluding VAT grew 20% to 15.1 billion kronor. With comparable exchange rates, the increase in sales was 14%.

Average market expectations were for a first quarter profit after financial items of 2.7 billion kronor, and a gross margin of 56.4%, according to a survey of analysts by SME Direkt.

H and M said the lower gross margins are due to increased costs from reintroduced textile quotas and a slightly higher dollar exchange rate.

H and M opened six stores during the first quarter, and closed three. The total number of stores amounted to 1,196 at the end of February compared with 1,069 at the same point last year.

“The start of the season has been delayed due to the cold weather in March. The late spring and the fact that Easter does not occur until April have led to very weak sales mainly in Central Europe,” the company said.

H and M said it plans to open more than 150 stores in the fiscal year 2005/2006, with 54 planned to open in the second quarter, mainly in USA, Germany, Spain, Holland and Poland. Two stores will close.

The company added that it plans to open a store in the Greek capital Athens in the spring of 2007.