Clothing Brand H&M Third Quarter Profit Rise

Under the influence of a strong dollar, the Swedish fashion group Hennes &Mauritz (H&M) made a slight growth of 0.2% in the third quarter of this year (2015), but reiterated its expansion plan this year.

According to the financial report, the profit for the third quarter of H&M rose slightly from SEK 5 billion 300 million last year to 5 billion 310 million kronor ($631 billion 200 million) in the 3 months ended August.

H&M said that this season is negatively affected by external factors, such as price of raw materials, cost inflation, supplier capacity, purchasing currency and pportation costs, mainly due to the strength of the US dollar.

Similarly, because of the strength of the US dollar, H&M gross profit dropped to 58.3% from 58.3% in the same period (2014).

H&M most of the supply of garments is mostly in Asia, which is paid in US dollars.

Bernstein analyst Jamie Merriman said: "in August, because of the sluggish sales, sales promotion increased by 0.3% over the same period last year. This is in line with our view that manufacturing costs are rising, the strength of the US dollar and the pressure of prices will continue to lead to gross pressure".

Richard Jaffe, an analyst at Stifel, believes that although costs are rising, "we believe that H&M has not been passed on to its customers due to increased costs and won by low-cost suppliers.

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He also noted that the devaluation of the renminbi partially offset the rising exchange rate of the US dollar.

"Although the supply source of H&M is traded in US dollars, the weakening of the RMB helps H&M buyers come to negotiate better procurement costs, which is conducive to gross margin".

In the fourth quarter of this year, H&M plans to open about 240 new stores.

India and South Africa are the two new retail countries this fall. The two stores opened in New Delhi and Cape Town in late September and October respectively.

Ming (2016) will open stores in three new markets, New Zealand, Cyprus and Puerto Rico.

Chief executive officer

Emphasizing that H&M is developing its strategy for fair living wage, he said that the situation showed "good progress".

"Now more and more suppliers will start to use fair wages to earn more equitable wages for their employees.

In addition, thanks to the commitment of our customers, we have collected nearly 20 thousand tons of ready-made garments for recycling and recycling since 2013.

Looking forward to the future, Jaffe pointed out: "fourth season."

And returning to normal weather in Europe will enhance customer demand for the company's trend in autumn. "

"However, we plan to invest continuously in IT and e-commerce for a long time, expand the scope of the company's products, and reduce the negative impact of the strong US dollar exchange rate on procurement costs in the short term".

Although it was negatively affected by the unusually large market climate in August, the third quarter sales grew 19% from 38 billion 810 million Swedish Swedish kronor last year to 46 billion 20 million kronor.

Sales in September grew by 12%.

In the first 9 months of this year, H&M net profit grew by 19% over the same period last year, reaching 20 billion 90 million Swedish dollars, while sales grew by 22% to 132 billion 170 million kronor.

The total inventory was increased by 40% in Swedish kronor, and increased by 38% in local currency.

But Jaffe also pointed out that the increased plateau is due to changes in administrative procedures, and streamlined and simplified procedures for handling invoice management of peripheral goods procurement.

"In the new process, the invoice for merchandise purchases is ahead of schedule, which means that from the third quarter of 2015, the size of the inventory and accounts payable will increase."