Fast-fashion giant Hennes & Mauritz on Wednesday said cheaper sourcing in Asia and better-than-expected August sales drove third-quarter profits ahead 13 percent.
The Stockholm-based firm said net income in the three months through August improved to 3.76 billion Swedish kronor, or $519.3 million, from 3.32 billion kronor, or $433.6 million, a year ago, beating analysts’ consensus expectations.
Sales in the period grew 11 percent to 16.75 billion kronor, or $2.3 billion, from 15.15 billion kronor, or $1.98 billion, last year. Currency conversions were made at average exchange rates for the respective periods.
“The third quarter developed well,” said Nils Vinge, H&M’s head of investor relations, on a conference call with analysts and reporters.
The numbers were the latest indication that Europe’s fast-fashion players are steaming ahead. Last week, H&M rival Inditex, which runs the Zara chain, reported a 14.6 percent hike in second-quarter profits.
H&M shares gained 6.85 percent to close at 312 kronor, or $43.09, in trading on the Stockholm Stock Exchange.
Vinge said sales in August grew 15 percent as H&M sold tracksuits that were codesigned by Madonna as part of a promotion with the singer and her stage troupe to wear H&M offstage during her “Confessions” tour, which ended last week in Tokyo. “The Madonna collaboration was widely regarded,” Vinge said.
Like-for-like sales in August grew 5 percent, he said.
Gross margin in the third quarter improved 0.7 basis points to 59.2 percent — the highest ever for H&M in a third quarter — thanks to lower buying prices in Asia and better back-office organization. Vinge said H&M recently split its buying and production offices in Asia into separate entities to generate better efficiency.
Though Vinge declined to give specifics on H&M’s plans to launch a new higher-priced niche brand next year, he said some 10 stores for the concept would open next spring. He said leases for the chain’s first stores already had been signed in the United Kingdom, Germany, Belgium and the Netherlands. He said the chain would “mix basics with high fashion” and have stores averaging about 5,000 square feet.
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By region, sales were solid in most Nordic countries, Italy, Spain and France, while they lagged in the difficult German and Austrian markets.
Despite the lagging German retail environment, Vinge said H&M would expand further in the country by opening more stores and introducing online shopping in Germany and Austria, starting next fall. Last month, H&M opened its first online boutique, in the Netherlands, which Vinge said had performed beyond expectations.
In the United States, which Vinge said was performing healthily, sales increased 23 percent to 1.25 billion kronor, or $172.6 million. H&M opened nine stores in the quarter, bringing its total in America to 105 units.
H&M plans to open about 80 stores in the fourth quarter worldwide. Vinge said most of the new units would be in the United States, France, Canada, the United Kingdom and Germany. H&M operates more than 1,260 stores around the world.