By Jens Hansegard 
 

STOCKHOLM--Swedish clothing retailer Hennes & Mauritz (HM-B.SK) on Thursday said sales in China have been particularly strong in its third quarter, as it reported net profit rose 22% on the year, topping expectations.

"China is the country where our expansion is strongest," Chief Executive Karl-Johan Persson said, adding that the company opened its store number 3,000 in Chengdu this September. H&M had 170 stores in China on Aug. 31.

The company said its online store in the U.S., launched in August, has been well received by customers.

"H&M will continue its rapid store expansion in the U.S. and sees online shopping as an important complementary sales channel in order to reach even more customers and thereby further strengthen H&M's position in the U.S.," Mr. Persson said.

The company said it is continuing to work on the global roll-out of the online store and plans to launch online shopping in more markets during 2014.

The company repeated its target of increasing its number of stores by 10% to 15% a year, and said that most of the 350 new net stores planned for 2013 will open in China and the U.S.

Sales from Sept. 1 to Sept. 24 increased by 8% in local currencies, the company said, adding that the full month of September will have a negative calendar effect of about 2 percentage points.

The closely-watched gross margin rose to 58.8% in the third quarter from 58.2% last year. H&M said external factors such as raw material prices, cost inflation, and transportation costs were neutral during the purchasing period for the third quarter compared with last year.

"Margins look good, much stronger than we and consensus had expected," says Bernstein analyst Jamie Merriman.

Net profit rose to 4.43 billion Swedish kronor ($690 million) in the third quarter, from SEK3.62 billion last year. Analysts had expected a net profit of SEK4.14 billion.

Sales excluding value-added tax in the third quarter rose to SEK32.04 billion from SEK28.81 billion last year. Operating profit was SEK5.76 billion, up from SEK4.80 billion last year. Analysts had expected operating profit of SEK5.33 billion.

Shares ended Wednesday at SEK263.90, just a few kronor off H&M's record high, valuing the company at SEK436.77 billion.

Write to Jens Hansegard at jens.hansegard@dowjones.com

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