By  on June 19, 2008

PARIS — Hennes & Mauritz on Wednesday said improved weather conditions in May helped lift second-quarter profits after cold climatic conditions in Europe hurt sales in the early spring season.

The Swedish fast-fashion giant said second-quarter profits after financial items improved 6 percent to 5.43 billion kronor, or $839.3 million, boosted by a 25 percent sales gain in May after weak sales in March and April. Overall, sales in the quarter ended May 31 rose 7.8 percent to 21.61 billion kronor, or $3.34 billion.

This compares with profits of 5.13 billion kronor, or $720.6 million, on sales of 20.05 billion kronor, or $2.81 billion, in the corresponding period a year earlier. Currency conversions were made at average exchange rates for the respective periods.

"The sales development during the quarter showed the weather sensitivity in the textile business," H&M said. It added the turnaround in May "directly coincided with improved weather conditions."

For the half, profits after financial items rose 19.2 percent to 6.88 billion kronor, or $1.11 billion, from 5.77 billion kronor, or $834.3 million, the previous year. Sales rose 12.3 percent to 41.35 billion kronor, or $6.67 billion, from 36.82 billion kronor, or $5.32 billion.

H&M, which sources about two-thirds of its products in Asia, said the weak U.S. dollar led to lower buying costs in the quarter, which reflected positively on gross margin. Those gains were slightly offset by high price reductions and increased transportation costs, H&M said.

H&M's robust sales came as European retailers are feeling the squeeze from high inflation and poor consumer sentiment.

Earlier this month, Inditex, the Spanish retailer that operates the Zara chain, indicated it has felt the impact of the slowing economies in Spain and Britain.

H&M said it would continue to aggressively expand, with 139 stores planned to open by the end of its fiscal year. Most of those units are slated for Germany, the U.S., Spain, France and Italy.

Nils Vinge, head of investor relations at H&M, said during a conference call that the chain this fall would open its second store in Tokyo. Vinge said H&M would use the occasion to launch its latest guest collaboration project, with Comme des Garçons' designer Rei Kawakubo."There is great potential for H&M in Japan," said Vinge.

Other upcoming growth projects include the launch of a home decoration line, which is planned for the turn of the year, and a more trendy collection for men, which will be introduced in select H&M stores starting in September.

H&M recently acquired Fabric Scandinavien AB, which owns the Cheap Monday brand and runs the Weekday and Monki store chains. Seven Weekday and 13 Monki stores were consolidated by H&M in the first half of the year. A new Weekday store opened a few weeks ago in Copenhagen. H&M said sales had been good there so far.

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