PARIS — Hennes & Mauritz AB, the world’s third-largest fashion retailer, beat expectations with a 4 percent rise in third-quarter net profit, but reported a worse-than-expected sales drop in August, reflecting a shortage of marked-down inventories.
Without providing a specific outlook for 2009, H&M said it remains “positive toward future expansion” and accelerated its store expansion plan to open 240 stores in the full year, up from 225 previously expected.
The Swedish fast-fashion company also revealed plans to start online sales in the U.K. beginning next fall, following rival Inditex’s move to sell its cheap-chic brand Zara online in 2010. H&M’s online shop is available for customers in Sweden, Denmark, Finland, Norway, the Netherlands, Germany and Austria.
Net profit in the three months to Aug. 31 totaled 3.46 billion kronor, or $507 million, as sales excluding value-added tax advanced 12.4 percent to 27.58 billion kronor, or $4.04 billion. Dollar figures are converted at average exchange rates for the period.
Total sales in August declined 3 percent from the same period a year earlier, while same-store sales fell 11 percent, compared with analysts’ expectations of a 5 percent decline.
“We are not happy with our sales, and we are working toward improving them,” head of investor relations Nils Vinge said during a conference call.
H&M was too cautious when planning its purchasing volumes of summer garments and, as a result, this had a negative impact on sales, particularly in August. “H&M’s summer sale sold out quickly, resulting in fewer markdown items left in August compared to the market in general,” the company said.
Sales in the third quarter were satisfactory in Sweden, Norway, and Germany and in new markets like China, Japan and Russia, but business was weaker in several markets such as Spain, the U.S. and France, as the recession continued to dampen consumer spending.
“During the recession, customers have become more attracted to markdowns,” the company stated.
Nevertheless, H&M is forging ahead with further openings in the fourth quarter to boost sales, with plans to open 150 stores and close nine. The openings include a store in St. Petersburg, Russia, four stores in Tokyo and H&M’s first two stores in Florida.
At the end of August, H&M had 1,840 stores in 27 countries.
“The U.S. is the market where we plan to grow the most,” Vinge said.
Gross margin — a key indicator of a retailer’s profitability — rose to 61.6 percent in the third quarter, compared with 60.8 percent in the same quarter a year earlier, despite the effect of the strengthening of the dollar on purchase prices.
“Although the accelerated store opening program for the full year and the launch of H&M online in the U.K. are positive themes, the disappointing early autumn-winter like-for-like run rate is likely to weigh on the shares in the short term,” Citi analyst Richard Edwards wrote in a note to clients.
Shares in H&M closed 4.3 percent lower at 391 kronor, or $57.35, Thursday. H&M is controlled by the family of chief executive officer Karl-Johan Persson, grandson of founder Erling Persson.
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)