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H&M Earnings Jump 18% on Strong Sales

Hennes & Mauritz saw third-quarter profits climb 18 percent to $325.8 million, as sales gained 14 percent to $1.71 billion, led by the U.S.

PARIS — Hennes & Mauritz, the Swedish fast-fashion giant, on Thursday reported strong third-quarter profits and buoyant U.S. sales.

The firm said profits in the three months ended Aug. 31 climbed 18 percent to 2.45 billion Swedish kronor, or $325.8 million, from 2.08 billion Swedish kronor, or $258.5 million, broadly in line with analysts’ consensus expectations.

Sales in the period increased 14 percent to 12.84 billion kronor, or $1.71 billion, from 11.25 billion kronor, or $1.39 billion, H&M said. On a like-for-like basis, sales rose 3 to 4 percent while gross margin stood at 55.9 percent. Dollar figures are at the average exchange rate.

In the U.S., where H&M has 70 stores, sales jumped 28 percent to 853 million kronor, or $113.4 million. Before the impact of currency exchange, sales in the U.S. bounded 43 percent.

Carl-Henric Enhorning, head of investor relations, told a conference call that U.S. quarterly losses were $800,000 to $900,000. He said H&M was gunning to break even for the year, but that it would take a “very good” quarter to do so.

He said the reception of the fall collection had been strong since colder weather hit around Sept. 15.

Meanwhile, Enhorning said H&M had begun to overhaul its stores in Europe with a more simplified format that had proved successful in the United States. Most of H&M’s more than 1,000 stores will have the format by next year.

H&M said it would open five stores in the U.S. in the fourth quarter, including a Manhattan flagship this October on Lexington Avenue just across the street from Bloomingdale’s.

H&M is preparing its West Coast debut with a unit in San Francisco, slated for fall 2005. H&M said next year it would also introduce its first stores in Hungary and Ireland. Sixty-five new stores are planned in the fourth quarter, Enhorning said.

Enhorning lauded early press reception for the highly anticipated launch of its Karl Lagerfeld-designed collection for men and women. A first for H&M, which usually designs its products with in-house teams, it is scheduled to hit 500 H&M stores worldwide on Nov. 12.

Enhorning said H&M would consider similar collaborations with marquee names if the Lagerfeld collection proved a commercial success.

H&M stock lost 1.47 percent to close at 200.50 kronor, or $27.54 at current exchange, in trading on the Stockholm stock exchange.