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Solid Growth Rolls On At H&M and Inditex

By Robert Murphy<br><br>PARIS — Europe’s fast fashion behemoths, Sweden’s Hennes & Mauritz and Spain’s Inditex, continue to race ahead. <br><br>On Thursday, H&M said profits for the third quarter ended Aug. 31 leapt 53 percent...

By Robert Murphy

PARIS — Europe’s fast fashion behemoths, Sweden’s Hennes & Mauritz and Spain’s Inditex, continue to race ahead.

On Thursday, H&M said profits for the third quarter ended Aug. 31 leapt 53 percent to $205.8 million. Inditex, driven by its Zara division, said net income for the first half ending July 31 grew 32 percent to $117.6 million. Dollar figures have been converted from the euro, for Inditex, and from the Swedish krona, in H&M’s case, at current exchange.

H&M reported sales in the quarter grew 15 percent to $1.36 billion, beating analysts’ expectations. Through the nine-month period, H&M said profit after financial items was $564.3 million, up 55 percent. Sales for the three quarters rose 15 percent to $4.03 billion.

“The results are quite impressive,” said Frederik Lijewall, analyst with UBS Warburg in Stockholm. “Their strategy of drumming up full-price sales and cutting reductions is paying off.”

Sagra Maceira de Rosen, fashion and retail analyst at J.P. Morgan in London, said the numbers were “ahead of my expectations. H&M delivered a clear message that they will focus on driving sales and maintaining profitability levels.”

During a conference call, Carl-Henri Enhorning, H&M’s head of investor relations, said operations in the U.S. had begun to improve. He said third-quarter losses in the market were cut in half to between $5.4 million and $6.4 million.

After aggressively entering the U.S. two and a half years ago, H&M in January said it would rein in expansion and concentrate on improving the bottom line.

“We’ve made progress in the U.S.,” Enhorning said. “We plan to reach the break-even point in the fourth quarter.”

Enhorning said H&M will have opened 15 new stores in the U.S. by yearend, three more than planned at the beginning of the year: “We’re back on track in

Maceira de Rosen agreed H&M’s long-term prospects in the U.S. were strong because it faces little competition in its category.

Enhorning said H&M would open 39 new stores in the fourth quarter. At the end of August, H&M operated 809 stores in 14 markets, including Germany, France, Spain, the United Kingdom, Sweden and Belgium.

Meanwhile, Inditex said sales in the first half of its financial calendar increased 25 percent to $1.62 billion.

Inditex, which owns Zara and five other branded apparel chains operating 1,376 stores in 41 countries, attributed the growth to strong comparable-store sales and the 92 stores it opened in the first six months of the year.

Sales at Zara grew 23 percent to $1.21 billion in the first half. Eighteen new Zara units opened in the period.

The firm said sales in the third quarter “remained in line with expectations.”

Unlike H&M, Inditex maintains a small presence in the U.S., where it operates eight stores, half of which are in Manhattan.