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Profitability remains strong at Hennes & Mauritz
22
Jun '11
Sweden based H & M Hennes & Mauritz AB announced Six-Month report.

The First Half-Year

• The H&M Group's sales including VAT increased by 10 percent in local currencies in the first six months of the financial year. Sales increased by 2 percent in comparable units. Sales in SEK were strongly negatively affected by currency translation effects. Converted into SEK, sales excluding VAT amounted to SEK 52,135 m (51,879).
• Profit after financial items amounted to SEK 9,290 m (12,095). Group profit after tax was SEK 6,875 m (8,950), corresponding to SEK 4.15 (5.41) per share.

The Second Quarter

• The H&M Group's sales including VAT increased by 12 percent in local currencies in the second quarter. Sales increased by 2 percent in comparable units. Converted into SEK, sales excluding VAT amounted to SEK 27,632 m (27,033).
• Gross profit amounted to SEK 17,057 m (17,808), corresponding to a gross margin of 61.7 percent (65.9).
• Profit after financial items amounted to SEK 5,752 m (7,040). Group profit after tax was SEK 4,257 m (5,209), corresponding to SEK 2.57 (3.15) per share.

Comments on the second quarter by Karl-Johan Persson, CEO

”Sales were good in the quarter with an increase of 12 percent in local currencies. We continue to gain market shares in a very challenging market, which proves H&M's strong position. Increasing interest rates, higher energy prices and austerity measures in many economies have decreased consumer spending power. During the spring, the fashion retail industry has been characterised by many price campaigns and special offers.

Our profitability remained strong with an operating margin of 20.3 percent despite strong negative effects from many external factors that were beyond our influence, such as the high cotton prices.

In addition to the cost inflation in the sourcing markets, a provision of SEK 248 million related to our recently started incentive programme for all employees, had a negative effect on profits. Also, the strong development of the Swedish krona continued to have a substantial negative effect on our reported profits in SEK.

We are optimistic about the future for H&M despite challenging conditions both in the sales markets and in the sourcing markets. We see great potential for future growth in existing as well as in new markets. Our business concept works well in all our markets as seen for example in recently added and fast growing markets such as China where we expand more rapidly.”

H & M Hennes & Mauritz AB

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