H and M profits exceed expectations

Swedish fashion retailer Hennes & Mauritz AB posted a first quarter profit after financial items of 3.41 billion kronor, up 27 percent from 2.68 billion in the same period last year, supported primarily by stronger gross and operating margins.

Gross margins rose to 58.9 percent from 56.5 percent, as sales excluding VAT grew

11 percent to 16.77 billion kronor. With comparable exchange rates, the increase in

sales was 11 percent, and for comparable stores the increase was 5 percent.

Market expectations were for a first quarter profit after financial items of 3.37 billion kronor, a gross margin of 58.0 percent, and sales of 16.92 billion kronor, according to a survey of analysts by SME Direkt.

Operating profits rose to 3.22 billion kronor, with operating margins rising to 19.2 percent from 17.1 percent.

H&M said the higher gross margins are due to a lower US dollar exchange rate, a more efficient buying process and a lower proportion of price reductions.