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Sales Gain, Margins Boost H&M Profits

Bolstered by stronger margins as well as store openings and better cost controls, Sweden's Hennes & Mauritz on Wednesday said profits jumped 27 percent in the first quarter.

Bolstered by stronger margins as well as store openings and better cost controls, Sweden’s Hennes & Mauritz on Wednesday said profits jumped 27 percent in the first quarter.

Profits for the three months ended Feb. 28 rose to 3.41 billion Swedish kronor, or $491 million, from 2.68 billion Swedish kronor, or $479.2 million, last year.

Sales for the quarter advanced 11 percent to 16.77 billion kronor, or $2.41 billion, from 15.07 billion kronor, or $1.93 billion, a year ago. Meanwhile, in February, sales rose 15 percent year-on-year in local currencies.

Excluding the impact of currency exchange, sales at the Stockholm-based firm improved 16 percent, while sales in comparable stores increased 5 percent. Dollar figures have been converted from the Swedish kronor at average exchange rates for the respective periods.

“We are very pleased,” said Nils Vinge, H&M’s head of investor relations, during a conference call Wednesday. Vinge said sales were “strong in all markets.” In the U.S., local currency sales increased 13 percent to 1.19 billion kronor, or $171.3 million.

Vinge added that higher gross margins, which increased by 2.4 percent, were due to a lower exchange rate between the dollar and kronor, a more efficient buying process and fewer price reductions.

According to the firm, sales of the extended footwear line, delivered to 200 select stores, have “started very well.”

During the first quarter, H&M opened nine doors and closed three, bringing the total store count to 1,351 at the end of February, compared with 1,196 at the same time last year. H&M said it plans to open 75 stores in the second quarter and close three.

Meanwhile, executives lauded the retailer’s Hong Kong flagship that opened two weeks ago. “The first Hong Kong flagship has exceeded our expectations so far,” said Vinge, also noting that an Athens flagship bows today. The firm said Madonna’s collaboration collection will be sure to drive sales in the second quarter.

Kylie Minogue will help H&M celebrate its first store in Shanghai. The pop star is slated to do a musical performance, although not a full concert, at the April 11 event. Minogue is the muse of H&M’s new beachwear line: H&M Loves Kylie.

Additional stores for the firm’s more expensive Collection of Style, or COS, brand are planned for Europe, bringing the total COS store count to 10 this year.

Shares in the firm dipped 1.7 percent to 398 kronor or $57.30.