H&M sec­ond-quar­ter profit beats ex­pec­ta­tions

The National - News - Business - - Inside Track -

The Swedish cloth­ing giant Hennes and Mau­ritz yes­ter­day an­nounced a stronger than ex­pected profit in the sec­ond quar­ter thanks to the open­ing of new stores and bet­ter cost con­trol.

Net profit for the pe­riod between March and May stood at 5.9 bil­lion kro­nor (Dh2.5bn), up by 10 per cent. Turnover also rose 10 per cent (five per cent in lo­cal cur­ren­cies), to 59.5bn.

Op­er­at­ing profit was 7.6 bil­lion, sig­nif­i­cantly higher than mar­ket ex­pec­ta­tions av­er­ag­ing 7bn kro­nor, ac­cord­ing to the fi­nan­cial agency SME Direkt.

“The profit in­crease in the sec­ond quar­ter is mostly ex­plained by con­tin­ued ex­pan­sion and tight cost con­trol,” the Swedish group said.

H&M con­tin­ues to open phys­i­cal stores around the world to com­pen­sate for the down­turn, and even de­cline, in its prof­itabil­ity, amid fierce com­pe­ti­tion from on­line sales plat­forms. “Cus­tomer be­hav­iour and ex­pec­ta­tions are chang­ing at an ever-in­creas­ing pace, with a greater and greater share of sales tak­ing place on­line,” chief ex­ec­u­tive Karl-Jo­han Pers­son said, adding this “brings great op­por­tu­ni­ties for the H&M group”.

“I’m hear­ing that we are lag­ging be­hind in e-com­merce, but we are con­vinced that our strat­egy en­sures the con­di­tions for our long-term growth.”

H&M ex­pects to in­crease its an­nual on­line sales by 25 per cent in the com­ing years, while total sales are ex­pected to grow by only seven per cent in June (down from the eight per cent in­crease in the same pe­riod last year), a cru­cial month for sum­mer sales.

In the sec­ond quar­ter, the Swedish com­pany fur­ther ex­panded its on­line of­fer, which is now avail­able in 41 mar­kets.

It plans to em­bark on the im­mense In­dian mar­ket in 2018.

The grow­ing on­line shop­ping trend is weigh­ing heav­ily on H&M’s share price on the Stock­holm stock ex­change, where it has lost nearly 40 per cent of its value since Novem­ber 2015.

In re­cent weeks, an­a­lysts have spec­u­lated about H&M’s po­ten­tial with­drawal from the stock mar­ket via a share buy-back by the Pers­son fam­ily.

Af­ter a strong open­ing yes­ter­day, shares fell and then re­cov­ered, trad­ing up 1.9 per cent at 208.6 kro­nor on the Stock­holm stock ex­change at 09.42 GMT. As of May 31, H&M had 4,498 phys­i­cal stores with a net open­ing of 147 points of sale since the be­gin­ning of the year.

In Ger­many, its big­gest mar­ket, H&M posted an eight per cent sales in­crease in the quar­ter, com­pared to one per cent in the United King­dom, four per cent in France, six per cent in China and nine per cent in the US. How­ever, th­ese fig­ures are much less flat­ter­ing in lo­cal cur­ren­cies.

We are con­vinced that our strat­egy en­sures the con­di­tions for our long-term growth Karl-Jo­han Pers­son Chief ex­ec­u­tive of H&M

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