Swedish fast-fashion giant Hennes & Mauritz AB (HMB.ST), owner of H&M, COS, Monki and Cheap Monday, among other brands, posted impressive sales and earnings increases for the second fiscal quarter and first fiscal half, helped by the weaker Swedish currency compared to that of the Eurozone, where most of its revenue originates.
For the quarter ended May 31, 2015, H&M group’s sales increased by 21 percent to SEK 45.9 billion ($5.56 billion), a 10 percent increase on a constant currency basis, and beating analyst estimates of SEK 44.7 billion. Gross profit increased 18 percent to SEK 27.2 billion ($3.3 billion), or 59.4% of gross sales. Adjusted operating profit rose by 10 percent to SEK 8.4 billion ($1 billion), and net income jumped 11 percent to SEK 6.4 billion ($780 million), or SEK 3.90 ($0.47) per share.
CEO Karl-Johan Persson commented on the quarterly results saying, “Sales development was again strong – particularly if we consider the more challenging conditions we faced such as strong comparables from last year, unusually cold spring weather in many of our important European markets and negative calendar effects.”
H&M had some successful openings in the quarter, including its first store in Peru, considered by the company to be one of the strongest ever in terms of sales, and its largest store to-date in New York’s Herald Square, as well as eight new e-commerce businesses in Poland, Portugal, Romania, the Czech Republic, Bulgaria, Slovakia, Hungary and Belgium.
For the six months ended May 31, sales increased by 23 percent to SEK 86.1 billion ($10.4 billion). On a constant currency basis, the increase was 12 percent. Adjusted operating profit increased 18 percent to SEK 13.16 billion ($1.6 billion), and after-tax income rose 19 percent to SEK 10.1 billion ($1.22 billion), or SEK 6.08 ($0.74) per share.
Speaking on the first-half results, Persson said, “Profits have also developed well in the first half-year, with an increase of 19 percent – this despite the fact that the increasingly strong U.S. dollar has resulted in increased purchasing costs and that we have continued to increase our long-term investments compared to last year.”
It looks like the positive momentum is continuing into June. So far this month, the group’s sales are ahead by 14 percent in local currencies compared to the same period last year, and H&M’s first store in Macau had a successful opening earlier in the month.
The H&M group plans a net addition of around 400 new stores during the current fiscal year, including in new markets of Taiwan, South Africa and India, and an e-commerce site in Switzerland in the fall.
In addition, H&M Beauty will be launched this fall, with an eventual gradual rollout to 900 H&M stores in 40 markets and online. H&M Beauty will offer a broad range of make-up, body care and hair care and will also include two subsidiary collections: a premium beauty line and a conscious range of Ecocert-approved sustainable products.
Addressing the company’s omnichannel expansion, Persson said, “Our goal is to offer a customer experience in which online and stores are closely interwoven, which will strengthen our customer offering further.”