H&M Second-Quarter Profit Misses Estimates on Strength of Krona

Beyonce for H&M | Source: H&M

STOCKHOLM, Sweden — Hennes & Mauritz AB, Europe’s second-largest clothing retailer, reported second-quarter profit that fell more than analysts expected, hurt by the strength of the Swedish krona and tough conditions in the fashion industry.

Net income dropped 11 percent to 4.66 billion kronor ($722 million) in the three months ended May 31, Stockholm-based H&M said in a statement today. That compares with the 4.87 billion- kronor average estimate of 18 analysts surveyed by Bloomberg.

“Overall sales were not satisfactory,” Chief Executive Officer Karl-Johan Persson said in the statement. “We take a long-term perspective and we are continuing with our investments in IT, online sales, new brands and broadening the range.”

H&M, purveyor of $12.95 leopard-print ballet flats and $5.95 tank tops, is increasing spending on online sales and new shop formats after falling behind Spanish competitor Inditex SA. Inditex, the owner of Zara stores, last week reported the weakest first-quarter income growth in four years as cool spring weather weighed on sales in western Europe and Spain imposed the toughest austerity measures in its democratic history.

H&M’s gross margin narrowed to 61.1 percent of sales from 61.7 percent a year earlier, the company said.

Second-quarter sales declined 7.3 percent to 31.64 billion kronor, excluding value tax, the company said June 12.

By Katarina Gustafsson; editor Paul Jarvis