Helped by reduced losses in the U.S., net profits at Swedish behemoth Hennes & Mauritz vaulted 43.1 percent to $118.7 million, or 14 cents a share, in the first quarter ended Feb. 28. This compares with $82.9 million, or 10 cents a share, a year ago.
And the Swedish firm said Wednesday that its international expansion would continue at a brisk pace, with about 110 stores slated to bow in 2003, 47 of them in the second quarter. At the end of the first quarter, H&M operated 849 stores in 14 countries.
Operating profits in the quarter increased 41.5 percent to $168.4 million, up from $119.4 in the year-ago period. Sales advanced 12 percent to $1.37 billion, up from $1.22 billion a year ago. Dollar figures are converted from Swedish krona at current exchange.
"Our performance remains strong," H&M chief executive officer Rolf Ericksen said during a conference call, emphasizing that improved full-price selling boosted gross margins to 54.4 percent of sales from 52.9 percent in the year-ago quarter. He attributed the gains to "higher fashion accuracy," sharper inventory levels and improved delivery flows.
The results were well ahead of market expectations, but lower-than-expected sales growth in February of 10 percent dented the stock, which fell 4 percent in trading Wednesday to $19.45 on the Stockholm Bourse.
"They’re clearly not seeing any like-for-like sales growth in February," noted Tony Shiret, analyst at Credit Suisse First Boston in London. But overall, he said the "fabulous" figures in the quarter reflect a big improvement in margins and suggest its "stupendous" growth should continue.
Ericksen acknowledged that the U.S. market remains a challenge, and that sales took a hit in February due to a series of storms and lingering cold weather in the Northeast. Pressed by analysts for specifics, he said losses in the U.S. narrowed to about $10.8 million from $14.1 million in the quarter, and that markdown levels were reduced versus a year ago. The company set a breakeven target for the U.S. market for the full year.
"This was perceived as a bit of a disappointment by some because H&M had reported breakeven already in the fourth quarter of 2002," noted fashion and retail analyst Sagra Maceira de Rosen at J.P. Morgan in London. "We believe breakeven for the full year is achievable."Ericksen characterized America as an important expansion market, with two new units bowing this month in the Washington area alone and an additional nine planned for the second quarter.
"The American operations are on the right track," he said. "Overall, we are not very disappointed with the situation. It’s still an improvement over last year."
Ericksen also acknowledged that H&M’s foray into four new markets this year — Poland, Czech Republic, Portugal and Italy — would result in operating losses of about $10.8 million to $21.6 million, but that investments would not be as heavy as in the U.S. and Spain, where losses swelled to as much as $64.8 million in 2001.
"These will be serviced by neighboring markets," he said. "We are not making a full setup."
Asked about March sales and whether there was any indication of a so-called "CNN effect" related to the Iraqi war, Ericksen replied: "It’s a short period so far, but we have not found anything yet that we could call a war effect."
The company said it is gunning for like-for-like sales growth of 3 to 5 percent in 2003, and added that favorable currency fluctuations would allow it to lower prices by about 2 to 3 percent.
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye