PARIS — Hennes & Mauritz AB said Thursday that net profits rose 6 percent in its fiscal fourth quarter thanks to strong sales, but its gross margin came under pressure from currency fluctuations and heavy markdowns prompted by an unusually mild autumn.
The Swedish fast-fashion giant posted a profit after tax of 5.6 billion Swedish kronor, or $863.1 million, in the three months ended Nov. 30. All dollar rates are calculated at average exchange for the period to which they refer.
Foreign exchange rates and intense price competition weighed on the gross margin, a key indicator of profitability. It fell to 60.8 percent in the fourth quarter, from 61.6 percent in the same period in 2012.
H&M said sales including value-added tax in the fiscal fourth quarter rose to 42.59 billion kronor, or $6.5 billion, a 3 percent gain in comparable terms, driven by a strong performance in Asia, southern Europe and online.
In 2013 as a whole, net sales totaled 128.6 billion kronor, or $19.72 billion, up 6.4 percent year-on-year, while net profit rose 1.7 percent to 17.1 billion kronor, or $2.63 billion. Negative currency translations shaved around 600 million kronor, or $92 million, from profits for the year.
“This is a good result considering the substantial long-term investments that we are making in areas such as IT, online, new brands and broadening our product range,” said H&M chief executive officer Karl-Johan Persson.
Looking ahead to 2014, the retailer maintained its target of increasing the number of stores by 10 percent to 15 percent a year with continued high profitability, while increasing sales in comparable units.
H&M indicated sales in January are expected to increase 15 percent in local currency terms compared with the same month last year.
“The financial year 2014 has got off to a good start, with strong sales development in December and January. Although there are still macroeconomic challenges in several of our markets, we are optimistic about 2014, which will be an exciting year with new countries and new opportunities,” Persson said.
The high-street chain surpassed 3,000 stores worldwide to end the 2012-13 fiscal year with 3,132 units, of which 2,936 were under its H&M banner; 85 COS; 79 Monki; 21 Weekday; eight & Other Stories, and three Cheap Monday. The company plans to open about 375 stores in 2014, with Australia and the Philippines set to join its existing 53 markets this year and South Africa to follow in 2015.
H&M will open flagships in cities including New York, Milan and Shanghai and sees good opportunities for expansion in Russia, Germany, Italy and Poland, head of investor relations Nils Vinge told analysts in a conference call. China is its fastest-growing market, with plans to open 80 to 90 stores there in 2014, he added.
Following the successful launch of online sales in the U.S. in August, the retailer plans to bring e-commerce to France in the spring or summer, with another three large markets to follow later this year.
COS is to open its first U.S. store in New York’s SoHo district, and will also launch online sales in the U.S. this year. In addition, COS will establish its first stores in South Korea, Australia and Switzerland. Meanwhile, & Other Stories will enter the Belgian and Dutch markets and launch online sales in Austria and Ireland.
Jyrki Tervonen, chief financial officer, said investment levels in 2014 would be higher than in 2013, though there would be “no drastic increases.”
Bernstein Research deemed the results “disappointing,” noting that both gross profit and gross margin in the fourth quarter fell below consensus forecasts.
“While there have been hints of better sales performance in recent months, we remain skeptical that H&M can deliver strong sales growth without continued investment in price. Over the long term, we remain concerned by the competitive pressure from other value apparel retailers and input cost headwinds, and expect margins will continue to fall,” it said in a research note.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast