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UPDATE 2-Sunshine helps H&M sales grow in tough market
June 15, 2012 / 6:45 AM / in 5 years

UPDATE 2-Sunshine helps H&M sales grow in tough market

* May same-store sales rise 3 pct vs forecast 1 pct fall

* Total sales up 12 pct vs forecast up 8 pct

* Quarterly turnover just above forecast

* Shares up 1.6 pct, outperform sector (Adds analyst comment, share price)

By Veronica Ek

STOCKHOLM, June 15 (Reuters) - Sales at world number two fashion retailer Hennes & Mauritz’s established stores bounced back unexpectedly in May after a weather-hit April, which analysts said might reflect discounting that could hit second-quarter profits next week.

As warmer temperatures returned in May, turnover at the Swedish company’s stores open a year or more grew 3 percent in local currencies, H&M said in a statement on Friday. That compared with expectations for a 1 percent drop in a Reuters poll of analysts.

Total sales in May, the last month of the budget apparel firm’s fiscal second quarter, were up 12 percent from a year earlier compared with a mean forecast for an 8 percent increase.

“I am quite surprised that they managed to deliver such good numbers in May when we’ve seen that the European markets have been pretty tough, for instance Germany”, said Sydbank analyst Nicolaj Jeppesen.

He warned that the strong May sales might have been driven by large markdowns in the wake of weak sales in rainy April, hurting profitability in the second quarter.

“We know that April was pretty tough with bad weather for retailers. The question is: Did they end up with larger stocks than expected and had to clear the spring collection by discounting? We’ll see that on the gross margin next week.”

In its single most important market, Germany, clothing sales fell 6 percent in May, according to industry data.

In April, H&M’s total monthly sales fell for the first time in more than two-and-a-half years due to cold weather and calender effects.

That came after a strong start to the year, despite challenging market conditions across debt-ridden Europe, where the cut-price fashion chain has the bulk of its sales.

Quarterly turnover at H&M, which competes with Zara owner Inditex,, rose by 15 percent to 31.7 billion Swedish crowns ($4.52 billion), just topping a forecast for 31.3 billion crowns. Full March-May earnings are due on June 20.


Shares in H&M were up 1.6 percent at 0907 GMT, outperforming a flat STOXX Europe 600 retail index. So far this year, H&M shares are up around 1 percent, while shares in Inditex have risen some 21 percent.

H&M has expanded rapidly the past decade and has around 2,500 stores in 44 markets across Europe, Asia and North America.

Inditex, the biggest fashion chain group, with more than twice the number of stores and a wider range of offerings, this week posted a 30 percent rise in net profits on strong sales in new markets and fast-growing China.

H&M plans 275 new stores this fiscal year, with China, the United States and the UK markets as the main focus. In an effort to keep up with Inditex, it plans to launch a new store concept next year.

Investments in the new store chain, which H&M has named '& Other Stories’, and costs related to other new product offerings to boost future growth pushed earnings below market expectations in the first quarter.

With a tradition of teaming up with well-known designers to draw attention to its brand, H&M said this week French fashion house Maison Marin Margiela would design a collection to go on sale in H&M shops around the world in November.

H&M declined to comment on the May sales figures. ($1 = 7.0190 Swedish crowns) (editing by Patrick Lannin and Hans-Juergen Peters)

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