Swedish fashion retailer increases net profit in first quarter in spite of shrinking margins and announces further expansion
Fashion retailer Hennes & Mauritz has announced a 5% rise in first-quarter profits, but margins shrank due to higher purchasing costs.
Net profit was 2.74bn Swedish kronor ($411m) in the December 2011-February 2012 period, up from 2.62bn kronor in the same period a year earlier.
Stockholm-based H&M said net sales rose to 27.8bn kronor, from 24.5bn kronor a year ago, and the increase continued in March. But the retailer said its gross margin tightened to 55.8%, from 57.8%, in part because it kept prices stable despite higher purchasing costs.
"The increased purchasing costs are due partly to higher cotton prices at the time for sourcing for the quarter compared to the corresponding sourcing period the previous year, but also to our long-term investments aimed at broadening our total offering," said H&M chief executive Karl-Johan Persson.
He said the company planned to open a new chain next year that would build on the launch of H&M's upscale chain Collection of Style, or COS, in 2007.
"Like COS, which today is very successful with good profitability, the new chain of stores will be independent and complement the other offerings from the group," Persson said. "We have great faith in this new brand and we see considerable potential for further initiatives."
Meanwhile, the company opened a new H&M store in Sofia, Bulgaria, this month, with plans for further outlets in Bulgaria, Latvia, Malaysia, Mexico and a franchise in Thailand by the end of the year.