H&M Posts 14% Profit Rise

Sweden's Hennes & Mauritz on Thursday said fourth-quarter profits grew 14 percent and eased concern its business would wilt in the tough economic...

PARIS — Sweden’s Hennes & Mauritz on Thursday said fourth-quarter profits grew 14 percent and eased concern its business would wilt in the tough economic environment by reporting sales in January increased 16 percent.

This story first appeared in the February 1, 2008 issue of WWD.  Subscribe Today.

The fast-fashion giant said profits after financial items for the three months through Nov. 30 reached 6.22 billion Swedish kronor, or $949.5 million, from 5.44 billion Swedish kronor, or $752.6 million, a year ago, below analysts’ expectations.

Sales in the quarter grew 17 percent to 22.82 billion Swedish kronor, or $3.48 billion, propelled by robust business in China and Eastern Europe. On a comparable basis, sales gained 5 percent, H&M said. Currency conversions were made at average exchange rates for the respective periods.

“It was a strong quarter,” Nils Vinge, H&M’s investor relations manager, said in a conference call. Vinge added H&M would open its first stores in Russia, in and around Moscow, starting in 2009.

H&M’s full-year profit climbed 21 percent to 19.17 billion kronor, or $2.83 billion. Still, the company’s ability to weather a slowdown in consumer spending has put H&M’s stock under pressure in recent months. Morgan Stanley earlier this week double-downgraded the retailer from “overweight” to “underweight” and revised its target price from 480 Swedish kronor, or $75.36 at current exchange, to 290 Swedish kronor, to $45.53, citing worries that the company would be squeezed by a dive in consumer confidence, particularly in Europe and the United States.

H&M shares gained 4.3 percent Thursday to close at 342 Swedish kronor, or $53.69, in trading on the Stockholm Stock Exchange.

Vinge said H&M was “not concerned as we go into 2008. It’s a tough market every year.” He said sales in December grew 10 percent, followed by the robust growth so far in January.

Still, he suggested sales in the British market had cooled. “There was no big increase in the U.K.,” he said, adding that the company had seen similar trends in the U.S. “Like-for-like in the U.S. and the U.K. was positive,” he added.

H&M has profited from expansion into fast-growing markets like Asia and the Middle East. Vinge said sales had been “spectacular” in the stores H&M opened last year in Shanghai and Hong Kong, with handsome business coming from the Middle East, too.

Continuing its global assault, H&M plans to open its first stores in Tokyo later this year. The chain expects to open another 190 units over the next 12 months, including new franchise boutiques in Egypt, Saudi Arabia, Bahrain and Oman.

Vinge said much of the chain’s expansion was earmarked for the U.S., Spain, the U.K., France, Germany and Italy.

He said four new COS stores, which offer higher-priced fashion, were expected to open over the year, and that the launch of a home line, postponed last year, should proceed in the next 12 months.