By  on September 27, 2007

Sweden's Hennes & Mauritz on Tuesday said store openings and strong sales in new markets helped offset weak sales in August to propel third-quarter profits ahead 25 percent.

Net income in the three months through August improved to 3.17 billion kronor, or $464.6 million, from 2.54 billion kronor, or $350.8 million, a year earlier, slightly better than most analysts' consensus expectations.

Sales in the period grew 12 percent to 22.03 billion kronor, or $3.23 billion, compared with 19.61 billion kronor, or $2.71 billion, in the same period last year. On a comparable basis, sales improved 2 percent. Currency conversions were made at average exchange rates for the respective periods.

"We are pleased with the results," said Nils Vinge, H&M's investor relations manager, in a conference call with reporters and analysts.

Vinge added that sales so far this month have been strong after a weak August, which he said was impaired by weather conditions in Europe. Comparable sales in August fell 1 percent, Vinge said.

"September is very satisfactory," said Vinge. "August disappointed."

He said H&M would postpone the launch of the H&M Home chain until next year because the company needed more time to develop the concept. "We see strong possibilities for H&M Home," said Vinge. "It needs to be really good when we launch it."

H&M's strong results seemed to augur well for the continued health of Europe's main fast-fashion players. Last week, Inditex, which operates the Zara chain, reported a 34 percent gain in second-quarter profits, ahead of analysts' expectations.

H&M continued its brisk rollout of stores, opening 16 units and closing four in the quarter.

Another 83 stores are planned to bow before the end of the year, including one in Vancouver, three in Hong Kong and one in Shanghai. Vinge said China has been a boon for H&M, with its Hong Kong store, which was opened earlier this year, already one of the firm's top 10 in terms of sales. "China has been fantastic," said Vinge. "We see a lot of potential in China."Meanwhile, Vinge said H&M was gearing up for its debut next year in Japan, where it will open two stores in Tokyo. As for the new COS line, which sells more expensive fashions, Vinge said stores would open in Antwerp, Belgium and Copenhagen by yearend, giving the chain 11 stores.

Vinge said H&M was looking forward to its one-off collaboration with Roberto Cavalli, which, starting Nov. 8, will be sold in approximately 200 H&M stores, a more conservative number of units than for some of the retailer's past collaborations, which have included Karl Lagerfeld, Stella McCartney and Viktor & Rolf.

"It's a more extreme and extravagant collection," said Vinge of Cavalli's designs for the chain.

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