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H&M posts 36% profit jump as it plans global expansion

3/24/2015

Swedish retailer H&M, which has already made huge waves in the United States, is now eyeing even more global omnichannel expansion.


The company is planning to open 400 new physical stores, a new flagship in New York City’s Herald Square, and at least nine new online stores.


The retailer also reported results for the first quarter ended Feb. 28. H&M reported that net profit climbed 36% to 3.61 billion kronor ($423.2 million), versus a year-ago profit of 2.65 billion kronor ($311.9 million). Analysts were expecting a profit of 3.37 billion kronor.


“We have made a very good start to 2015 – in terms of both sales and profits,” said Karl-Johan Persson, CEO of H&M. “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. It is very important to always be able to meet customers’ shopping demands and expectations in the fast digitalizing development that is taking place in the retail market."


Earnings per share climbed to 2.18 kronor (26 cents) from 1.60 kronor (19 cents). Its sales, including VAT, surged to 46.79 billion kronor ($5.5 billion) from 37.52 billion kronor ($4.4 billion), while sales excluding VAT rose 25% to 40.28 billion kronor from 32.14 billion kronor. The company's operating profit surged 36% to 4.64 billion kronor, compared to 3.40 billion kronor.


“At the same time as this expansion is going ahead, we are continuing to broaden our product range and to develop further our various other brands COS, & Other Stories, Monki, Weekday and Cheap Monday, which are all becoming more and more established in the world of fashion,” Persson said. “H&M Sport and our extended shoe range have been well received, and we will now launch them in more stores. And in the autumn we are looking forward to offering our customers our latest initiative, H&M Beauty – our new beauty concept that will be launched in an inspiring shopping environment which will further strengthen our customer offering.”


The company did warn that the stronger dollar will result in gradually increased purchasing costs for the coming quarters.


The strong US dollar will affect our sourcing costs going forward, we will make sure that we always have the best customer offering in each individual market,” Persson concluded.


The H&M group has more than 3,500 stores in 57 markets including franchise markets.


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