H&M misses Q1 forecast, posts 13% profit drop

Hennes & Mauritz, the world's third-biggest clothing retailer by sales, posted a surprise 12.6 per cent fall in its first-quarter pretax profits on Thursday as currency swings dented margins.

Pretax profits in the December-February period were 3.55 billion Swedish crowns ($439 million; Dh1.62 billion), short of the average forecast of 4.11 billion given in a Reuters poll of 20 analysts and down from the 4.06 billion made a year ago.

The gross margin fell to 56.6 per cent from 59.6 per cent, which compared with a forecast of 58.6 per cent. Excluding currency effects the margin would have been 60.8 per cent.

H&M and Spanish rival Inditex, which owns the Zara chain, are feeling the pinch of the global downturn but thanks to their offering of high-fashion looks taken straight from the catwalks at low prices they have weathered the grim sales environment better than some other clothes retailers.

H&M's quarterly group sales rose 18 per cent to 23.3 billion crowns. In local currencies, the increase was 4 per cent. In comparable units, sales decreased by 5 per cent.

"In the second quarter the company expects that it will not be able to benefit from the positive effects from the strengthening of primarily the euro, as a consequence of the hedging of the internal flow of goods," H&M said, adding it expected the effects from the hedging to even out over time.

Net sales in February rose 1 per cent year-on-year versus a forecast 1.4 per cent rise. In stores open a year or more, sales fell 8 per cent versus a forecast 8.5 per cent drop.

H&M said price reductions had in the quarter been on the same level as a year earlier, and that the stock-in-trade was well composed and at a satisfactory level. 

 

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