Sales including VAT grew 13% to SEK37.52bn in the quarter

Sales including VAT grew 13% to SEK37.52bn in the quarter

Swedish fashion retailer Hennes & Mauritz has booked a double-digit fourth-quarter sales increase despite a tough retail environment. 

Sales including VAT grew 13% to SEK37.52bn (US$5.88bn) in the three months to 28 February, from SEK33.15bn in the same period of last year.

In local currencies, sales rose by 12% year-on-year. Excluding VAT, sales reached SEK32.1bn, up from the prior year's SEK28.39bn.

The company, which operates 3,192 stores under the H&M, Cos, Monki, Weekday, Cheap Monday, & Other Stories banners, said February sales, including VAT, increased 11% in local currencies.

Bank of America Merrill Lynch analyst Richard Chamberlain said although the group's first-quarter sales excluding VAT were 1% below its estimates, the positive like-for-like trend continues, suggesting comparable store sales climbed 1-2%.

He noted there has been "some concern" over the impact of rising cotton prices on clothing retailers as these have hit a one year high, but they are still well below the spike of 2010-11. 

"If cotton prices continue to rise this could be more of a negative for lower priced retailers such as H&M as raw material tends to be a higher proportion of the cost of a garment. 

"They are only one element of cost though (20-40% of cost of goods sold) and tend to be diluted down the manufacturing chain before they affect retailers like H&M."

The retailer should expect a "better sales trend" from 2014, Chamberlain added, partly driven by e-commerce catch up, a stable to improving gross margin, operating expense leverage from like-for-like sales growth, and share gains in global fragmented apparel markets.

While Stifel analyst Richard Jaffe raised H&M's earnings per share estimate for the first quarter, after sales were above its expectations. 

Expert analysis

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