Summer fashions boost sales

By Thomas Mulier  |   2008-6-19  |     NEWSPAPER EDITION

HENNES & Mauritz AB, Europe's second-largest clothes retailer, reported profit growth that beat analysts' estimates and said sales rose at a faster pace last month as shoppers started buying summer fashions.

H&M gained as much as 8.3 percent in Stockholm trading, the most in almost three months. Second-quarter net income climbed to 3.94 billion kronor (US$650 million) from 3.47 billion kronor a year earlier, the Stockholm-based company said yesterday.

Earnings growth was fueled by the dollar's 13-percent drop against the krona in the second quarter, which helped reduce purchasing expenses.

The retailer buys more than 60 percent of its clothes in Asia, where items are typically priced in dollars. Revenue rose 25 percent in May, and climbed 14 percent in comparable stores to end two months of declines.

"They have a very strong concept and will continue to do well," said Anders Wiklund of Evli Bank in Stockholm. "Stores in the low-price segment are relatively better off. People still need to buy clothes. I see a shift from more expensive clothes to cheaper ones."

European retailers are facing ebbing consumer confidence as higher bills feed inflation, leaving people with less to spend. H&M's 14-percent increase in second-quarter profit was the slowest in two years. Inditex SA, Europe's largest clothes retailer, reported its smallest profit gain in four years.