Net income for the three months through May rose 25 percent to 5.81 billion kronor ($870 million), Stockholm-based H&M said in a statement today. The average of 16 analyst estimates compiled by Bloomberg was 5.63 billion kronor. Sales in June have got off to a good start, the retailer also said.
The vendor of $24.95 imitation-leather skirts is investing in geographic expansion, new selling formats and e-commerce amid increasing competition from online retailers such as Asos Plc (ASC) and budget chains including the U.K.’s Primark. H&M said today that it plans to open as many as 10 new online markets next year and reiterated plans to add 375 stores in 2014.
“These results underpin our full-year earnings forecast agenda, and encouragingly point to an accelerated phase of online market launches,” Richard Edwards, an analyst at Citigroup Inc. in London, said in a note.
H&M shares rose 0.7 percent to 293.7 kronor at 9:01 a.m. in Stockholm, trimming this year’s decline to 0.9 percent.
Also today, the retailer announced that it will introduce an extended shoe range in selected H&M stores. The range will appear in nine countries and in online markets, in the second half of the year, H&M said.
Narrower Margin
The gross margin narrowed to 60.8 percent in the quarter from 61.1 percent a year earlier. External factors, such as cost inflation, were “slightly negative” and will continue to be so during the third quarter, H&M said.“Despite revenue strength, gross margin has continued to be a drag on profitability,” Simon Bowler, an analyst at Exane BNP Paribas, said in a note.
Revenue, excluding value-added taxes, advanced 20 percent to 37.8 billion kronor, H&M said on June 11.
Bigger competitor Inditex SA (ITX) this month reported fiscal first-quarter net income that topped analysts’ estimates as the owner of the Zara brand limited expansion costs by relying more heavily on e-commerce for growth.
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