PARIS — Hennes & Mauritz continued to gain market share in the second quarter, reporting a better-than-expected 6.4 percent increase in net profits, helped by store openings and successful spring collections, especially in countries where the world’s third-largest fashion retailer has recently expanded.
But the Swedish fast-fashion giant also reported flat sales in May, while sales in stores that have been open longer than a year declined 9 percent in the same month, in line with analysts’ expectations.
Net profits in the three months to May 31 totaled 4.19 billion kronor, or $533 million, as sales excluding value-added tax advanced 22.8 percent to 26.53 billion kronor, or $3.37 billion, compared with the same period a year earlier. On a same-store basis, sales slipped 2 percent. Dollar figures are converted at average exchange rates for the period.
“We are continuing to gain market share despite the recession,” said chief executive Rolf Eriksen, who is retiring next week. Eriksen will be succeeded by Karl-Johan Persson, the 34-year-old son of the company’s majority owner and grandson of H&M’s founder.
Henrik Frojd, an analyst with Swedbank who has a “buy” recommendation on the stock, said the results beat its own forecasts as well as consensus expectations, noting H&M managed to absorb a strong appreciation of the U.S. dollar in the quarter.
H&M said the recession has dampened consumer spending in all of its markets, especially Spain, the U.S. and Scandinavian countries. However, sales in countries where H&M has recently expanded, such as Japan and Russia, have exceeded expectations.
H&M, known for its one-off collections by high-profile fashion labels such as Stella McCartney and Comme des Garçons, recently announced a collaboration with luxury shoemaker Jimmy Choo in a move to further rise its profile with a new limited collection of shoes and accessories, due to be launched in November. The company is also continuing the rollout of its more upmarket brand COS, which already counts 15 stores in Europe.
H&M reiterated future expansion plans, saying it still expects to open 159 stores in the second half of the year, while closing 18. Most of the stores are planned to open in the U.S., U.K., Germany, France, Italy and Spain.
Gross margin, a key indicator for retailers’ profitability, declined to 61 percent from 62.9 percent in the second quarter.