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June 23, 2005

H&M Get's it Up - Fashion Public Relations

H&M proves it's right in fashion as profit soars 34%

EUROPE'S largest fashion retailer Hennes & Mauritz met second-quarter expectations with a 34 per cent rise in pre-tax profit, fuelled by higher sales and improved gross margins.

But the UK was one of its weaker markets for sales over the period.

The Swedish chain, which has two branches on Princes Street and another in Kinnaird Park, reaped a £260 million pre-tax profit, compared to £190m a year earlier.

H&M said May sales were up 18 per cent against a forecast of 15 per cent, showing that not everyone was feeling the effects of the consumer slowdown.

Gross margin was up 1.7 per cent on the same period last year to 60.1 per cent.

In a statement the company attributed this improvement in its second quarter, which runs to the end of May, to "lower quota costs, lower dollar rate and also lower price reductions".

"It is a very good report, especially the sales growth," said Anna-Karin Envall, analyst at Handelsbanken.

H&M said new collections introduced during the second quarter were well received by consumers, and helped boost the quarter's operating margin to 22.8 per cent, a best for the company.

The company's improved clothing sales come after it reported a slowdown at the start of the year.

It said: "Well-received collections have contributed to the group's best operating margin in a second quarter."

Main competitor Inditex, which owns the Zara chain, posted a pre-tax profit in the February-April period of £119.8 million and its gross margin was 55.7 per cent. Inditex blamed a poor choice of designs for its weak start to the second quarter.

Elsewhere in the Swedish market, smaller clothing retailer Lindex said this week it had boosted pre-tax profits to £7.2m in its third quarter, which also ended on May 31.

However, it reported falling sales, down 3.3 per cent compared to growth in the wider Swedish market of 4.9 per cent.

H&M said it would open up to 90 stores during the remainder of the year, mainly in Britain, the United States, Germany, Spain and Poland.

The Swedish fashion giant registered 53 per cent growth in the Spanish market, 18 per cent in Germany, 13 per cent in the US, nine per cent in Sweden - but only six per cent in the UK.

Over the past six months, H&M opened 62 new shops, of which 13 are in Germany, seven are in Poland, five are in the UK and four in Spain, France, the Netherlands, the Czech Republic and Italy.

The retailer - whose range extends from underwear to suits and which has featured collections designed by Karl Lagerfeld and shortly by Stella McCartney - said it had enjoyed good development in all its markets this spring.

It recently opened its first branch in Ireland and will open stores in San Francisco and Budapest in the autumn.

H&M opened its first store in 1947 and at the end of May this year had 45,000 employees in 1121 stores in 21 countries.

THE FACTS

H&M was set up in 1947 by Erling Persson in Sweden. It was listed on the stock market in 1974 and owns and runs all its own stores.

Germany is H&M's biggest market, followed by Sweden and the UK.

H&M does not have any factories and works with around 700 independent suppliers. Around 60 per cent of production takes place in Asia. It has around 100 designers who work with a team of pattern designers, buyers and budget controllers to create H&M's collections.

Since 1980 H&M has offered shopping by mail order.

In 1998 H&M began its online shopping service, when e-commerce started as a test activity in Sweden. H&M also sells own-brand cosmetics.

Posted by at June 23, 2005 10:42 AM

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