H&M SEES 3RD-QUARTER PROFITS SOAR

Byline: Robert Murphy

PARIS — Hennes & Mauritz AB, Sweden’s “fast-fashion” retailer, on Friday reported strong third-quarter revenue and profit, and said it would not rein in an aggressive expansion campaign despite the grim global economic outlook.
Rolf Eriksen, chief executive officer, told a conference call that profits before taxes jumped 56 percent, to $108 million, on a 34 percent rise in revenues, to $987 million, for the three-month period ending August 31. Excluding the effects of currency fluctuation, sales rose 22 percent. Dollar figures are converted from the Swedish krona at current exchange rates.
Analysts said the results were on par with expectations and that H&M appeared well positioned for continued growth.
“Of course, H&M is not immune to economic changes, but they are less exposed to a slowdown than luxury firms,” said Asa Mossberg, equities analyst at UBS Warburg in Stockholm. “Consumers tend to trade down when things get tough.”
H&M stock Friday increased 8 percent, to $16.40, in trading on the Stockholm Stock Exchange.
After five quarters of decline, this marks the second quarter in a row that H&M has reported double-digit growth. Previously, Eriksen had blamed eroding profit and revenue on extensive markdowns to clear out collections that were too young and fashion progressive.
Eriksen suggested the retailer has overcome that problem. “Our collections are good, with a good mix between high-fashion and basic items,” he said. “The autumn collection has been well received by both customers and the press.”
He said H&M may even struggle to meet demand for its cheap chic. “I can’t guarantee that we will have enough [merchandise] for the end of the year,” he said in response to one analyst’s query. “But we’re working on it.”
Eriksen said the Sept. 11 terrorist attacks have resulted in “a minor decrease” in sales in its 21 U.S. stores. H&M closed its three Manhattan units for between two and three days after terrorist attacks on the World Trade Center.
“Sales were not foremost,” explained Eriksen. “We were considering the safety of our employees and customers.”
In Europe, however, where H&M operates 715 stores, Eriksen said that sales have not been affected. He said H&M will continue with its expansion plans during the fourth quarter by opening 38 stores. Ten of those stores are scheduled to bow in the U.S.
Meanwhile, in 55 of its stores, H&M said it is testing a new upscale apparel range that’s 10 to 15 percent higher in price than its standard line.
For the nine months, sales have increased 27 percent, to $2.9 billion, while profits have risen 34 percent, to $304 million.

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