Sweden’s Hennes & Mauritz AB reported first-quarter profit above expectations, but the worlds second-largest fashion retailer warned that the robust dollar may dent future performance.
The company stated a pre-tax profit of 4.7 billion Swedish crowns in the three months ended February 28, up from the SEK 3.49 billion reported a year ago. In comparison analysts had projected a result of SEK 4.4 billion.
H&M said that its new sport products and its extended shoe range have been “well received” and that the new additions represented the companys ongoing long-term investments to extend its product offering.
Additionally, the company said it would launch its latest project – H&M Beauty, which is set to replace the companys existing cosmetics brand. The new products will be launched in the autumn of 2015 and will be available in around 900 H&M stores across 40 markets, the company said.
Net income for the financial first quarter came in at SEK 3.61 billion, up 36% compared to the same period of last year. Analysts had estimated that the Stockholm-based company would report a net income of SEK 3.37 billion.
The company said it remains confident in its future expansion in both brink-and-mortar stores and online offerings. H&M plans to add 400 new stores in 2015, the majority of which would be located in China and the U.S. H&M also said it will expand its online reach to nine countries in the year ahead.
The regions reported the most sales growth across all of the companys markets during the three months. The U.S. accounted for SEK 5.42 billion of revenue, lagging behind Germanys SEK 8.67 billion, while China stated sales of SEK 2.15 billion. Overall, the company reported a revenue of SEK 46.79 billion, including value-added tax, versus SEK 37.52 billion a year ago.
In February the company opened its first store in Taiwan and intents to also expand to Peru and Macau.
H&M said sales in local currencies have gained 9% so far this month. The company, however, warned that the robust dollar will moderately increase H&Ms purchasing costs.
“Our attractive customer offering and strong expansion both through stores and online, as well as our work on continuous improvement, are among the reasons for increased market share gains and good profits,” said Chief Executive Karl-Johan Persson.
H&M gained 0.97% on Monday and closed at SEK 353.40 in Stockholm. On Tuesday the stock edged up 0.93% to SEK 356.70 at 08.37 GMT, marking a one-year increase of 24.72%. The company is valued at SEK 511.24 billion.
According to the Financial Times, the 29 analysts offering 12-month price targets for H&M have a median target of SEK 335.00, with a high estimate of SEK 400.00 and a low estimate of SEK 235.00. The median estimate represents a 5.21% decrease from the last closing price.
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