SWEDEN: H&M Q3 profit hit by weather and economy
- Q3 profit after tax rose 0.9% to SEK3.6bn
- Sales increased 7% to SEK 28.8bn
- Margins declined to 58.2% from 58.6%
Low consumer confidence, poor weather and negative currency effects hit H&M Hennes & Maurtiz's third-quarter margins and earnings, the fashion retailer said today (27 September).
H&M admitted that trading continued to be "challenging" in many markets in the third quarter - both in regards to weather and the macroeconomic climate, with austerity measures and restrained consumption. Sales in June and July were strong, while sales in August were weaker due to the "extreme heat wave" across a number of European markets.
Profit after tax increased 0.9% to SEK3.6bn (US$546.3m) over the quarter ended 31 August, as margins declined to 58.2% from 58.6% in the same period of the prior year.
Sales increased 10% in local currencies but were up 7% in Swedish krona to SEK28.8bn. Currency translation effects had a SEK200m impact on profit after financial items.
The group is ramping up the pace of expansion, with plans to open 300 stores this year, up on the previously planned 275 stores.
However, the company said it would postpone its US e-commerce launch to summer next year. It originally planned to open the site in autumn this year. It attributed the delay to developing an m-commerce site as well as intensifying preparations of its online roll out in other markets.
H&M is also working to launch its new brand '& Other Stories' in Europe during spring 2013.
CEO Karl-Johan Persson said the brand is aimed at "women with an interest in fashion, who want to create their own personal style and focuses on the total look".
The new stores will offer a broad range of shoes, bags, jewellery, beauty products, lingerie and clothes. The collections are being created by a group of in-house designers from studios in Paris and Stockholm.
Describing the results as "weaker than expected", Bank of America Merrill Lynch analyst Richard Chamberlain said the retailer should "regain momentum" during the fourth quarter, due to a stronger top line combined with undemanding comparable sales.
"The main risk to margins in our view is the potential need for more investments in quality to sustain the top line," he added.
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