H&M Pressure On Gross Profit Margin In The First Quarter

The second largest in the world

Retailer Hennes & Mauritz AB (HMb.ST) today announced that its post tax profit in the first quarter of fiscal year 2015 increased by 36.4%, from 2 billion 649 million kronor in the 2014 fiscal year to 3 billion 613 million Swedish krona, or about 423 million US dollars, exceeding the market expected 3 billion 320 million krona.

For SEK 4 billion 637 million, about $551 million, an increase of 3 billion 401 million kronor compared to the same period in the previous year by 36.3%, with a market forecast of SEK 4 billion 400 million.

The group announced last week that in the first quarter of February 28, 2015, global tax sales increased by 15% based on the local exchange rate, and converted to SEK after a total of 46 billion 791 million SEK, an annual increase of 24.7%.

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For SEK 40 billion 276 million, the Swedish krona, which was 39 billion 200 million above market expectations, increased by 25.3% from 32 billion 143 million kronor in the same period of the previous year.

Anne Critchlow, analyst at Societe Generale SA (SOGN.PA), said that the latest data showed Hennes and Mauritz AB (HMb.ST) increased by 6% in the same store in the first quarter, and she strongly recommended "holding" the shares.

The Hennes & Mauritz AB (HMb.ST) chief executive, Karl-Johan Persson, praised the group "very well in the beginning of 2015."

Our attractive products, strong online and offline expansion and continuous improvement efforts are the reasons for the rising market share and profitability. "

In addition, the gross profit margin reached 55.2% in the first quarter, benefiting from a reduction in promotional activities and a further rise of 30 basis points over the same period of 54.9% in the previous year, which is 54.6% higher than the market expected.

The group also disclosed that its global sales increased by 9% on the local exchange rate in the first three weeks of March compared with the same period in the first 9% weeks of the year. The impact of the US dollar was weaker than that in February and the first quarter.

The group warned that the appreciation of the US dollar would substantially increase the purchasing cost this year, as the group purchases 80% commodities in Asia and mainly settled in US dollars.

Over the past 12 months, the US dollar has risen by 27% and 33% against the euro and the Swedish kronor respectively.

Exane BNP Paribas SA (BNP.PA) farba analyst Simon Bowler said the pressure on Hennes & Mauritz AB (HMb.ST) gross margin was the strongest in the past 10 years.

Hennes & Mauritz AB (HMb.ST) plans to add 400 stores this year, mostly in China and the US market. Peru, Macao and South Africa and India will welcome the first H&M store in the first half and the second half of the year.

In terms of online expansion, H&M shop will be stationed in Portugal, Poland, Czech, Romania, Slovakia, Hungary, Bulgaria, Belgium and Switzerland during the year.

At the end of the first quarter, the total number of stores in the group reached 3551, compared with 3192 in the same period last year.

The shares of Hennes & Mauritz AB (HMb.ST) were higher and lower on Tuesday. When the deadline was 2.91% to 343.1 krona, the market was closed.