H&M Raises Rate of Expansion, Profit Declines

   By Jens Hansegard 
 

STOCKHOLM--Swedish fashion retailer Hennes & Mauritz AB (HM-B.SK) Thursday said it plans to open more stores in 2013 than previously announced, as its first-quarter net profit fell more than analysts had expected.

"Sales have been characterized by the challenging situation for the fashion retail industry in many of H&M's markets, mostly due to the continued tough macro-economic climate and unfavorable weather during parts of the quarter primarily in Europe and North America," Chief Executive Karl-Johan Persson said, adding that 2013 will be a challenging year.

The Stockholm-based retailer said net profit dipped to 2.46 billion Swedish kronor ($380.43 million) in the three months to Feb. 28, from SEK2.74 billion a year earlier. Analysts had expected a net profit of SEK2.51 billion.

The company said the expansion plan for 2013 has been increased to around 350 new stores net from the 325 previously planned, with most of the new ones planned for China and the U.S.

It repeated it will expand this year into five new markets--Chile, Estonia, Lithuania, Serbia and, via franchise, Indonesia--adding to the 48 where it already operates.

Australia will become a new H&M market in 2014, it said.

Comparable store sales fell 3% in the first quarter and profits were hit by large long-term investments and substantial negative currency translation effects, the company said.

H&M said sales in March, particularly in Europe and North America, were hit by the unusually cold weather and snowstorms, which delayed the start of the season for the spring collection. The company also said that sales in March this year should be seen in the light of strong sales in the year-earlier month.

Sales including value-added tax rose to SEK33.15 billion from SEK32.50 billion a year earlier.

Operating profit fell to SEK3.13 billion from SEK3.53 billion, slightly below a forecast of SEK3.17 billion. Gross margin dipped to 55.2% from 55.8% a year earlier.

Shares in Stockholm closed Wednesday at SEK226.60, valuing the company at SEK375.04 billion.

Write to Jens Hansegard at [e-mail]

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