H&M Posts Forecast-Beating 2Q Rise in Profit

By Dominic Chopping Features Dow Jones Newswires

Fashion retailer Hennes & Mauritz AB (HM-B.SK) posted Thursday a forecast-beating 10% rise in second-quarter net profit as it continued its store expansion plans and highlighted a growing share of sales via online channels.

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The group had 4,498 stores as of 31 May 2017, a 10% increase from the 4,077 stores it had at the same time last year.

The fashion retail market is going through a period of extensive change because of increased digitalisation, and

Chief executive Karl-Johan Persson said the company is continuing to invest and develop the business with a digital focus.

"H&M group's online sales have developed very well and already account for 25% to 30% of total sales in certain established markets. We are expecting our online sales to increase by at least 25% per year, with profitability in line with that of the physical stores," he said.

Sales in the U.K., Scandinavia and Eastern Europe as well as in many of its growth markets were good during the quarter, the company said. But it was more challenging in several of its major markets such as the U.S., China, the Netherlands and Switzerland.

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It plans to open around 500 new stores this year but will close 100 as it shuffles its portfolio to optimise the number of stores, store space, rebuilds and relocations. At its first-quarter earnings the company expected a net addition of 430 stores this year.

Group sales including VAT for June 2017 are expected to increase by 7% in local currencies compared to the same month last year, it said.

H&M's net profit in the second quarter, which runs from Mar. 1, 2017 to May 31, 2017, was 5.9 billion Swedish kronor ($687 million), compared with SEK5.36 billion for the same period last year, topping expectations of SEK5.76 billion according to a FactSet poll.

Write to Dominic Chopping at dominic.chopping@wsj.com; Twitter: @domchopping @WSJNordics

(END) Dow Jones Newswires

June 29, 2017 03:09 ET (07:09 GMT)