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H&M powers on with strong half year, quarter, expects online sales to grow 25%-plus a year

All’s looking pretty good for H&M as the Swedish fashion giant delivered positive Q2 and H1 results Thursday morning. Profits for both periods up with Q2 beating expectations? Tick. Sales encompassing the December to May periods up? Tick. Sales for June up? Tick, although they are expected to fall just short of analysts’ expectations.

So the Hennes & Mauritz global machine powers on with the retailer expected to open 500 stores this year, although there are also an 100 expected closures, it admitted. New store markets planned for next year include Uruguay and Ukraine.

Also expect its COS brand to hit SEK10bn in sales this year; the new Arket brand will launch later this year with five stores and in 18 online markets; and 60 new H&M home departments will also have opened this year.

Overall, CEO Karl-Johan Persson noted H1 sales in the UK, Scandinavia and Eastern Europe, as well as in many of its growth markets, “were good”. However, he conceded business was “more challenging” in several of its major markets such as the US, China, the Netherlands and Switzerland.

Big news is that online sales really are powering ahead and already account for 25-30% of total in some established markets. They are expected to grow by at least 25% a year, it said.

“The profitability of the online sales is in line with that of the physical stores, the company said,” noted Persson.

It will continue to invest in a digital focus with India the headline new online market for 2018. With the Philippines and Cyprus yet to be added to the digital roster this year, H&M added six new markets during the spring for Turkey, Taiwan, Hong Kong, Macau, Singapore and Malaysia. That takes its current total to 41 online markets globally.

Persson also added: “Fashion retail is going through a period of extensive change because of increased digitalisation. Customer behaviour and expectations are changing at an ever-increasing pace, with a greater and greater share of sales taking place online.

“This shift brings great opportunities for the H&M group. We are in a strong position, with well-known global brands suited to both physical stores and online sales, and we are financially strong and can invest at the pace required.”

And now for the figures:

H&M group’s Q2 sales including VAT grew 10% to SEK59.54bn and by 5% to SEK51.38bn excluding VAT, with “continued very good development” for COS, & Other Stories, Monki, Weekday and H&M Home brands, it said.

H1 sales for the December-May period increased 9% including VAT to SEK113.9bn. Sales excluding VAT rose 5% in local currencies to SEK98.37bn.

The retailer said its sales including VAT for June are expected to increase 7% on-year in local currencies, below analysts’ call for an 8% rise.

Q2 profit after financial items increased a forecast-beating 10% to SEK7.7bn as net profit increased to SEK5.9bn/SEK3.56 a share from last year’s SEK5.36bn/SEK3.24 a year ago, citing continued expansion and tight cost controls. Gross profit increased 9% to SEK29.35bn, corresponding to a gross margin of 57.1%, down from 57.6% last year.

H1 profit after financial items increased 6% to SEK10.92bn while net profit rose to SEK 8.35bn/SEK5.05 per share from SEK7.9bn/SEK4.77 a year ago.

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