H&M remains positive towards future expansion

25 Jun '10

5 min read

Consolidated net interest income was SEK 152 m (303).

Profit after financial items amounted to SEK 12,095 m (9,338), an increase of 30 percent.
Profit after tax for the Group after an estimated tax rate of 26.0 percent (27.5) amounted to SEK 8,950 m (6,770) for the six-month period, corresponding to earnings per share of SEK 5.41 (4.09).

Return on shareholders' equity, rolling twelve months, was 54.8 percent (51.6) and return on capital employed, rolling twelve months, was 72.9 percent (70.9).

Results for the second quarter
Gross profit for the second quarter amounted to SEK 17,808 m (16,201), an increase of 10 percent. This corresponds to a gross margin of 65.9 percent (61.0).

Operating profit for the second quarter amounted to SEK 6,965 m (5,671), an increase of 23 percent. This corresponds to an operating margin of 25.8 percent (21.4).

Profit after financial items was SEK 7,040 m (5,784), an increase of 22 percent.

Profit after tax was SEK 5,209 m (4,193), corresponding to SEK 3.15 (2.53) per share.

Comments on the second quarter
Sales excluding VAT increased by 2 percent. In local currencies the increase was 10 percent. The quarter started with strong sales in March, while sales in both April and May were affected by unusually cold weather for the season in most of H&M's markets.

The gross margin amounted to 65.9 percent (61.0), an increase of 4.9 percentage units.

Currency hedging of the mark-up on internal sales of goods to the subsidiaries had a positive impact on the gross margin of approximately 0.5 percentage units. Such currency hedges had a negative impact of 1.3 percentage units on the gross margin in the second quarter 2009, i.e. a difference of 1.8 percentage units year-on-year.

The gross margin was also positively affected by a weaker US dollar at the purchase period for garments sold in the second quarter this year compared to the time of the purchases for the second quarter 2009. Other factors, such as greater surplus capacity at suppliers, lower transportation costs, favourable raw material prices and efficiencies in the buying process also impacted the gross margin positively in the second quarter 2010.

Increased mark-downs affected the gross margin negatively by 0.3 percentage units compared to the same quarter last year.

Cost control in the Group remains good. Selling and administrative expenses in the quarter amounted to SEK 10,843 m (10,530), an increase of 3 percent. In local currencies the increase was 10 percent. The cost increase was related to the expansion.

The stock-in-trade amounted to SEK 8,562 m (8,601). Excluding currency translation effects, the stock-in-trade increased by approximately 2 percent. The stock-in-trade as per 31 May 2010 consists of more spring garments than estimated due to a weaker sales development than planned during April and May. This could lead to a higher price reduction level in the third quarter compared to the corresponding quarter last year.

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H & M Hennes & Mauritz

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