H&Ms first-quarter and February sales increased 15%

H&M's first-quarter and February sales increased 15%

Swedish fashion giant Hennes & Mauritz (H&M) has booked an increase in sales during both the first quarter and February, marking its 23rd consecutive month of gains.

Sales, including VAT, grew 15% in local currencies to reach SEK46.79bn (US$5.38bn) for the three months to 28 February, compared to SEK37.52bn in the same period last year. Excluding VAT, sales amounted to SEK40.28bn, up from SEK32.14bn a year ago.

The retailer, which operates 3,551 stores under the H&M, Cos, Monki, Weekday, Cheap Monday, and & Other Stories banners, said February sales, including VAT, increased 10% in local currencies.

Stifel analyst Richard Jaffe believes the sales gain was driven by a favourable customer response toits trend-right, value priced merchandise and the positive benefit of a weakening Swedish krona against most countries’ currencies.

However, he did warn of possible gross margin pressure in the near term, as the increasingly stronger US dollar exchange rate will result in gradually increased purchasing costs in the second, third and fourth quarters. 

"Despite the increased costs, we believe H&M is unlikely to pass the cost increases on to their customers in order to be the lower-cost provider and gain market share," he noted.  "We view this as the correct strategy for the company but acknowledge the near-term pressure on earnings."

Last week, H&M revealed it would impose stricter requirements on the use of short-term, fixed duration contracts for workers at its supplier factories after acknowledging their use restricts worker rights.

Responding to a new report - 'Work Faster or Get Out: Labor rights abuses in Cambodia’s garment industry' from Human Rights Watch (HRW), H&M said it will revise its contract requirements, as a first step towards achieving a change towards 'un-fixed' duration contracts.