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H&M Profits Rise, U.S. Sales Robust

Sweden's Hennes & Mauritz on Wednesday said profits increased 16 percent in the first quarter, but warned that cold March weather in Europe meant a soft start to spring.

PARIS — Sweden’s Hennes & Mauritz on Wednesday said profits increased 16 percent in the first quarter, but warned that cold March weather in Europe meant a soft start to spring.

Profits for the three months through Feb. 28 rose to 2.68 billion Swedish crowns, or $356.3 million, from 2.31 billion crowns, or $318.7 million, last year, marginally below most analysts’ expectations.

Sales advanced 14 percent to 15.07 billion crowns, or $2 billion, from 12.61 billion crowns, or $1.74 billion, driven by double-digit gains in the United States and Spain.

Before the impact of currency exchange, sales improved 20 percent. Currency conversions were made at average exchange rates for the respective periods.

Comparable-store sales grew 4 percent, Nils Vinge, H&M’s head of investor relations, said on a telephone conference call.

Vinge said unseasonably cold weather across much of Europe translated into weak sales in March, particularly in the important market of Germany and in Central Europe. Though the mercury climbed across much of the Continent last week, Vinge said it was too early to gauge the impact on sales.

First-quarter sales rose 23 percent in the United States — a 43 percent increase in local currency. Vinge said H&M would continue to expand in America, and would open its first two stores in the Los Angeles area this year. Meanwhile, four stores are to open in Montreal this spring.

H&M inaugurated six new stores in the first quarter. Fifty-four shops are planned to bow in the second quarter, mostly in America, Germany, Spain, the Netherlands and Portugal.

The fast-fashion giant, which announced plans for its first store in Greece next spring, said it would inaugurate 150 stores by yearend.

H&M shares dropped 2.53 percent to close at 288.50 crowns, or $38.36, in trading in Stockholm.

This story first appeared in the March 30, 2006 issue of WWD.  Subscribe Today.