PARIS — Fast-fashion behemoth Hennes & Mauritz on Wednesday reported better-than-expected first-half profits but the company disappointed with its second-quarter sales performance.
The Swedish firm’s profit growth was a bit slower in the quarter ended May 31 than in the half, with net pretax profits for the three months up 20 percent to $334.5 million from $278.7 million. H&M, which opened 53 stores in the six months ended May 31, said net pretax profit for the year to date rose 28.2 percent to $554.7 million, versus $432.5 million in the year-earlier period.
Meanwhile, sales cooled in the second quarter, growing 6.9 percent, to $1.88 billion, on the whole and by a weaker-than-expected 9 percent for the month of May.
Sales for the half increased 9 percent to $3.52 billion, compared with $3.22 billion last year. Excluding the negative impact of currency exchange rates, sales increased 12 percent in the half. Dollar figures are converted from the Swedish crown at current exchange.
H&M shares finished the day unchanged at $23.85 in trading on the Stockholm Bourse.
In a refrain which has apparently achieved global acceptance, H&M blamed “colder than usual” spring weather for the second quarter’s less robust growth. On the other hand, the company said precise inventory levels limited price reductions and improved gross margins in the second quarter by 2.1 percentage points to 56.7 percent.
“May sales were disappointing,” said fashion and retail analyst Sagra Maceira de Rosen at J.P. Morgan in London. “And the impact of currency was higher than expected.”
Still, she lauded improved margins and H&M’s ability to control costs even as it entered new markets — Poland, the Czech Republic and Portugal.
In a conference call, Carl-Henric Enhorning, head of investor relations, said H&M shaved losses in the United States, where at the end of May the company operated 56 stores.
“There’s still a possibility that we reach break-even [in the U.S.] by the end of the year,” he said. “The majority of the stores are now profitable.”
First-half sales in the United States increased 38 percent to $159.9 million, and were up 12 percent after currency impact. In the second quarter, sales increased 42 percent to $91.1 million or 15 percent after currency exchange.Enhorning declined to provide comparable-store sales figures for the U.S., but allowed that they were slightly down. “We need better turnover improvement in the U.S.,” he said.
Enhorning said the U.S. remains an important expansion market, with new stores slated to bow by yearend in cities including Philadelphia, Boston and SoHo in New York.
During the first six months, H&M opened 11 stores in the U.S., eight in Germany, seven in France and four each in Spain and Sweden. Norway, Portugal and the Czech Republic each got two new stores. H&M now operates 893 stores in 17 countries. It plans to have more than 950 stores by the end of the year.
In September, H&M will make its first foray into Italy, opening a 17,222-square-foot unit on Milan’s Corso Vittorio Emanuele, where its Spanish competitor, Zara, opened a flagship last year.
Although Enhorning did not provide indications for early June sales, he said that events that had prompted H&M to adopt a cautious stance in the second quarter, including war in Iraq and SARS, “were no longer topics.”
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