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Lagerfeld Leads H&M to 23.9% Net Gain

Pumped up by the Karl Lagerfeld line, H&M's fourth-quarter net bolted 23.9 percent to $605.9 million, as sales gained 14.7 percent to $2.37 billion.

NEW YORK — Shoppers gobbling up the Karl Lagerfeld collection last November, along with lower markdown activity and international growth, allowed global specialty retailer H&M Hennes & Mauritz AB to deliver robust quarterly results.

H&M’s fourth-quarter bottom line bolted 23.9 percent to 4.06 billion kronor, or $605.9 million at average exchange, on sales that soared 14.7 percent to 15.87 billion kronor, or $2.37 billion.

“Things were weak in the opening of the quarter, but the closing was very strong,” said Carl-Henric Enhörning, head of investor relations, on a conference call Friday. He cited low markdown levels, international expansion and cost controls for the company’s profit increase in the quarter.

For 2005, the company plans to offer a larger amount of women’s formalwear than has been available in prior years.

“You can also expect to find some of the garments with higher quality than you did before. This is something that we’re trying out,” chief executive officer Rolf Eriksen said on the call.

The launch of Lagerfeld at H&M bolstered sales in November by at least 24 percent. But there were other dynamics at play that drove shoppers into the Swedish firm’s stores. Enhörning said overall merchandise prices dropped 4 percent in the quarter.

“First and foremost, our collections were appreciated by our customers,” Enhörning said. “We have been able to lower customer prices because of a weakened U.S. dollar, which has led to reduced buying costs. The average price per article was around 4 percent lower in 2004 than the year before. This means that the turnover increase of 12 percent translates to a volume increase of 16 percent.”

Enhörning also said the strong bottom line was “the result of several factors: continued cost consciousness, low price reductions, cost-efficient expansion and also positive effects from a weaker dollar to the benefit of our customers as well as for H&M.” 

For the year, sales rose 11 percent to 53.7 billion kronor, or $7.26 billion, while profits climbed 15 percent to 11.01 billion kronor, or $1.49 billion.

During the year, the firm opened 136 stores.

This story first appeared in the January 31, 2005 issue of WWD.  Subscribe Today.

He said one of the year’s key openings “was the flagship…on Lexington Avenue, straight across [from] Bloomingdale’s.”

Looking ahead, H&M said it will add between 145 to 155 new stores in 2005 with a focus on Germany, its largest market. Ireland and Hungary will be new markets, and H&M expects to end the year with about 1,200 stores.

Regarding the lifting of the quota, the company said it’s getting better prices on some items so far this year.