H&M Gross Profit Margin Plunged In The Three Quarter, But Sales Rebounded In September.

Because of the strong US dollar, the cost of sales is increasing, and the second largest in the world.

The gross profit margin of Hennes &Mauritz AB (HMb.ST) plunged 240 basis points to its lowest value in 11 years in the three quarter, but its pre tax profit remained in line with market expectations.

Hennes &Mauritz AB (HMb.ST) dropped rapidly after opening 0.7% on Thursday, and the most recent decline was 1.35% to 306.2 kronor.

In the three quarter of August 31st, Hennes &Mauritz AB realized a pre tax profit of 6 billion 936 million kronor, or about 826 million US dollars, which basically met the 6 billion 930 million Swedish Swedish kronor expected by Reuters composite analysts, but slightly down 0.4% compared with 6 billion 969 million Swedish kronor last year.

The profit after tax was 5 billion 306 million SEK, which was basically unchanged from 5 billion 296 million kronor in the same period last year, less than the 53.3-53.7 billion Swedish Swedish kronor. The diluted earnings per share rose from 3.20 kronor in the same period last year to 3.21 krona.

In the three quarter, during the period of the 24% quarter, the US dollar rose to an average of 24% against the Swedish kronor exchange rate, and the sales cost of Hennes &Mauritz AB, which was deeply dependent on the US dollar settlement in Asia, rose by 23.3% to 20 billion 312 million Swedish kronor in the three quarter. Therefore, although the gross profit margin increased to 13.6% krona, the gross profit margin dropped sharply from 55.9% in the same period last year to 55.9%, the worst level in the three quarter of the past 11 years.

The group pointed out that the slowdown in sales growth in August led to a negative impact on the 30 basis points of gross margin.

Operating margins also decreased by 280 basis points to 14.9%, compared with 17.7% in the same period last year.

The Group expects the gross profit margin of the fourth quarter will still be affected by the adverse floating of the exchange rate, while Sanford C. Bernstein analyst Jamie Merriman estimates that Hennes &Mauritz AB will continue to be challenged in the next 6 months.

Inventories surged 40.5% to 25 billion 200 million kronor, much of which grew out of a strong dollar exchange rate. The group said that a large proportion of the current inventory is new, because the inventory portfolio is still good.

In the three quarter, the total sales of Hennes &Mauritz AB amounted to 46 billion 24 million Swedish kronor, or about 5 billion 570 million US dollars, slightly higher than the 45 billion 800 million Swedish Swedish kronor expected by Reuters composite analysts, up 18.6% from last year's 38 billion 805 million Swedish kronor and 11% by local exchange rate.

In September, the group's pre tax sales increased by 12% at the local exchange rate as at September 22nd, and rebounded significantly from 1% in August, but still less than the sales growth of the largest competitor, Zara parent Inditex SA (ITX.MC) in the first 6 weeks of the three quarter of September 10th as of September 10th. Jamie Merriman also shows that the growth of Hennes &Mauritz AB is not as good as market expectations from the current data.

The increase of 1% in August is not only far from that.

The 5.4% also ended the double-digit growth in the past 10 consecutive months, or the lowest level since March 2013 (down 4%). The group attributed the blame to the abnormal warm weather demand in several major European markets.

Soci e t e G e n e rale SA (SOGN.PA), Rale analyst Anne Critchlow, said the Hennes &Mauritz &Mauritz was more heavily affected by the weather in the Nordic market, and she estimated that the same store sales in August dropped by 8% over the same period last year.

After the rapid expansion of the first 9 months, Hennes &Mauritz AB increased 29 and 25 new stores in China and the United States respectively, pushing the two markets to grow at 21% and 22% sales respectively (at local exchange rate), leading the group's ten largest market, and making China's largest market in the seventh largest market in the same period last year become a fifth largest market (calculated by sales volume).

Or the number of stores is second only to Germany, the second largest market for the group.

Hennes &Mauritz AB maintained the main target of Sino US market and opened 400 stores throughout the year. In the first 9 months, it only increased 164 stores by the average. The fourth quarter will increase 240 stores by the average 3 new stores. Among them, the most strategic one will be India and South Africa's first store opened in New Delhi and Cape Town in the next week and October respectively.

Online sales will also expand to 8 markets in the current fiscal year and expand to 23 markets in Russia and Switzerland, and will expand to 9 new markets in Japan, Ireland, Greece, Luxemburg and many Eastern European countries in the 2016 fiscal year.

New Zealand, Cyprus and Puerto Rico will also welcome the first H&M entity store in the next fiscal year.

Other brands, the group plans to open more COS and & Other Stories stores this year, of which COS will enter 4 new markets such as Luxemburg, Hungary, Canada and Czech. In addition, the H&M Beauty beauty product line introduced this year has been stationed in 700 stores in 28 markets. The number of stores that will be sold before the end of this fiscal year will reach 900, covering 42 markets.