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H&M Profit Misses Estimates Hit by Markdowns, Currency Effects

H&M A/W 2013/4 Campaign | Source: H&M
By
  • Bloomberg

STOCKHOLM, Sweden — Hennes & Mauritz AB, Europe's second-biggest clothing retailer, reported fourth-quarter profit that missed estimates as foreign-exchange effects and product markdowns weighed on results.

Net income for the three months ended Nov. 30 rose 6.1 percent to 5.61 billion kronor ($869 million), Stockholm-based H&M said in a statement today. The average of 12 analyst estimates compiled by Bloomberg was 6 billion kronor.

"The new year has started well, with strong sales in December and January," Chief Executive Officer Karl-Johan Persson said in the statement. "Although there are still macro- economic challenges in several of our markets, we are optimistic about 2014."

H&M said it plans to open 375 stores in 2014. The retailer is expanding and investing in new concepts and e-commerce as it chases larger rival Inditex SA, the owner of the Zara chain. On Dec. 11, Inditex reported a slight increase in nine-month profit.

H&M last year began selling online in the U.S., introduced the & Other Stories chain and expanded to countries including Chile. It’s set to open in Australia and the Philippines this year and in South Africa as early as 2015.

The vendor of $5.95 tops, which sold a collection by French designer Isabel Marant in November, said its gross margin narrowed to 60.8 percent in the quarter from 61.6 percent a year earlier. Sales advanced by 12 percent to 36.5 billion kronor, excluding value-added tax, it said in December.

Swedish Teams

H&M, which is expanding its sports offering and designed the outfits for the Swedish Olympic and Paralympic teams at the winter games in Sochi, rose 0.9 percent to 287.2 kronor in Stockholm yesterday. The shares have fallen 3 percent this year after gaining 32 percent in 2013.

“The consensus view on H&M has increasingly turned more positive over the last few months,” UBS AG analysts Adam Cochrane and Andy Hughes said in a note this week, citing an improved outlook for Europe and a foreign exchange tailwind.

“The competitive threat from discount retailers such as Primark and the Internet has not lessened, but H&M has responded through increased fashionability and moving into adjacent product areas to increase the differentiation.”

By Katarina Gustafsson; Editors: Paul Jarvis, Kim McLaughlin

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