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Strong Sales Boost H&M Net

PARIS — More price-cutting in the back office and less on the sales floor helped Swedish fashion retailer Hennes & Mauritz post first-half profits that handily beat last year’s performance as well as analysts’ forecasts.<br><br>In...

PARIS — More price-cutting in the back office and less on the sales floor helped Swedish fashion retailer Hennes & Mauritz post first-half profits that handily beat last year’s performance as well as analysts’ forecasts.

In the six-month period ended May 31, net income jumped 55.6 percent to $347.8 million from $220 million in the same period last year. Sales increased 15.5 percent to $2.59 billion from $2.24 billion in the year-ago six months.

Excluding currency rate fluctuations, revenues increased 12 percent. Dollar figures are converted from the Swedish krona at current exchange.

“We plan to continue to grow sales and profits in the second half,” H&M chief executive officer Rolf Eriksen told analysts and journalists during a conference call. “We plan to open more stores. We have a solid platform for solid growth.”

Frederik Lijewall, analyst with UBS Warburg in Stockholm, applauded the results, which outpaced consensus expectations by about 15 percent.

“They are very positive figures,” commented Lijewall. “How many companies in this market generate such impressive growth?”

H&M stock closed up 0.3 percent to $19.33 in trading Wednesday on the Stockholm Bourse.

On the conference call, Carl-Henric Enhorning, H&M’s head of investor relations, addressed performance in the United States. After aggressively entering the U.S. market two years ago, H&M in January said it would rein in expansion and concentrate on improving the bottom line.

“We’re seeing a turn for the better in our U.S. operations,” Enhorning said. “The results are not brilliant, but we are getting back on track.”

H&M operates 34 stores in the U.S. Sales in the half there increased 16.3 percent to $114.8 million compared with $98.7 million in the same period last year. U.S. profits weren’t disclosed.

Enhorning said H&M was slowly adapting to American shopping habits by reducing the average size of its stores from about 25,000 square feet to 15,000 square feet.

Meanwhile, Enhorning told the conference call that H&M had reduced inventory and has become more reactive in its buying practices by replenishing orders several times during the season.

“We have increased the part of purchases made during the season, which has, to a large extent, contributed to the lower price reductions and higher profits,” he said.