Wow
Fashion retailer Hennes & Mauritz AB posted a 12 percent increase in second-quarter profit Wednesday, helped by a spike in sales in May but capped by higher marketing costs.
The company also said it will enter China next year and that it will start a new store chain for women and men under a separate brand name, but did not reveal the new name.
The stores will sell a niche assortment at higher prices than H&M's regular ranges, however, Chief Executive Rolf Eriksen said.
"It will be an addition to H&M, particularly in existing, ripe markets," Eriksen told Dow Jones newswires on the sidelines of a news conference Wednesday.
Net profit for the three months ending May 31 rose to 2.65 billion kronor ($361 million), from 2.36 billion kronor in the same period last year, boosted by lower tax payments, in turn due to low tax rates in a number of H&M's markets.
The Stockholm-based company that sells fashionable clothes at low prices said sales, excluding value added tax, rose 10 percent to 17.1 billion kronor ($2.33 billion) from 15.5 billion kronor in the year-ago period.
H&M said its second-quarter sales were weak.
"Even if the trend during the quarter was rising, the total sales level was not reached as planned," the company said. "Despite this, H&M has taken market shares in basically all markets during the first half year, especially pleasing are very good sales in the Nordic countries."
H&M also said that it plans to open at least 100 stores during the remaining part of the financial year, mainly in the U.S., Spain, France, Britain, Canada and Germany. During spring 2007, the company had signed contracts for one full-range store each in Shanghai and in Hong Kong, the company's first stores in the Far East.
Eriksen said the company's profit margins in China should benefit from lower shipping costs as H&M produces most of its clothes in Asia.
Comparing China to Poland - one of H&M's most-profitable markets and one recently entered - Eriksen said China "is a very exciting market for us."
"When we entered Poland, we looked at around 9 million people with the same purchasing power as in Scandinavia, and in China there are 200, or 300, million," he said.
"In order to keep up with our sales growth target of 10-15 percent, we needed to enter a new market, and we chose China." he said.
H&M is also expanding aggressively in the U.S. and before the end of the year will have 100 stores in that market.
Including China and earlier announced plans to enter the Middle East, Greece and Slovakia, H&M expects to be present in 27 countries in 2007.
In afternoon trading, shares were up 11 kronor ($1.50), or 4.3 percent, to 270 kronor ($36.7), outperforming a modestly higher broader market.
Mattias Karlkjell, an analyst with ABG Sundal Collier, told Dow Jones that the company had performed well in the second quarter, adding he expected full-year estimates to remain unchanged or be slightly raised.
He also said the new, pricier brand will be "proof H&M has been successful in raising its image." He cited the retailer's pacts with top designers like Karl Lagerfeld, Stella McCartney and Viktor & Rolf and its upcoming advertising campaign with Madonna.
http://www.forbes.com/work/feeds/ap/2006/06/21/ap2830209.html
Fashion retailer Hennes & Mauritz AB posted a 12 percent increase in second-quarter profit Wednesday, helped by a spike in sales in May but capped by higher marketing costs.
The company also said it will enter China next year and that it will start a new store chain for women and men under a separate brand name, but did not reveal the new name.
The stores will sell a niche assortment at higher prices than H&M's regular ranges, however, Chief Executive Rolf Eriksen said.
"It will be an addition to H&M, particularly in existing, ripe markets," Eriksen told Dow Jones newswires on the sidelines of a news conference Wednesday.
Net profit for the three months ending May 31 rose to 2.65 billion kronor ($361 million), from 2.36 billion kronor in the same period last year, boosted by lower tax payments, in turn due to low tax rates in a number of H&M's markets.
The Stockholm-based company that sells fashionable clothes at low prices said sales, excluding value added tax, rose 10 percent to 17.1 billion kronor ($2.33 billion) from 15.5 billion kronor in the year-ago period.
H&M said its second-quarter sales were weak.
"Even if the trend during the quarter was rising, the total sales level was not reached as planned," the company said. "Despite this, H&M has taken market shares in basically all markets during the first half year, especially pleasing are very good sales in the Nordic countries."
H&M also said that it plans to open at least 100 stores during the remaining part of the financial year, mainly in the U.S., Spain, France, Britain, Canada and Germany. During spring 2007, the company had signed contracts for one full-range store each in Shanghai and in Hong Kong, the company's first stores in the Far East.
Eriksen said the company's profit margins in China should benefit from lower shipping costs as H&M produces most of its clothes in Asia.
Comparing China to Poland - one of H&M's most-profitable markets and one recently entered - Eriksen said China "is a very exciting market for us."
"When we entered Poland, we looked at around 9 million people with the same purchasing power as in Scandinavia, and in China there are 200, or 300, million," he said.
"In order to keep up with our sales growth target of 10-15 percent, we needed to enter a new market, and we chose China." he said.
H&M is also expanding aggressively in the U.S. and before the end of the year will have 100 stores in that market.
Including China and earlier announced plans to enter the Middle East, Greece and Slovakia, H&M expects to be present in 27 countries in 2007.
In afternoon trading, shares were up 11 kronor ($1.50), or 4.3 percent, to 270 kronor ($36.7), outperforming a modestly higher broader market.
Mattias Karlkjell, an analyst with ABG Sundal Collier, told Dow Jones that the company had performed well in the second quarter, adding he expected full-year estimates to remain unchanged or be slightly raised.
He also said the new, pricier brand will be "proof H&M has been successful in raising its image." He cited the retailer's pacts with top designers like Karl Lagerfeld, Stella McCartney and Viktor & Rolf and its upcoming advertising campaign with Madonna.
http://www.forbes.com/work/feeds/ap/2006/06/21/ap2830209.html
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