H&M H1 sales up 7 percent, plans aggressive retail expansion

Against the challenging macroeconomic market conditions, H&M said with continued strong expansion, the company continued to gain market share in many markets. The group’s sales in local currencies including VAT increased by 5 percent in the second quarter and by 7 percent in the half-year period. However, profit after financial items declined in the second quarter as well as in the first half-year.

“It has been a challenging half-year for fashion retail in many markets, but we have great confidence going forward and are continuing to develop our offering further within all our brands. The combination of strong brands, a large body of retail stores in good locations and a successful e-commerce business puts us in a unique market position for future growth,” said Karl-Johan Persson, CEO of H&M.

First half sales increase, profit down

Sales including VAT converted into SEK increased by 2 percent to 54,341 million Swedish krona (6,572.7 million dollars) in the second quarter. Sales including VAT in the half-year period increased by 5 percent and amounted to 104,965 million Swedish krona (12,695 million dollars)). Sales excluding VAT increased by 2 percent to 46,874 million Swedish krona (5,669 million dollars) in the second quarter and by 5 percent to 90,565 million Swedish krona (10,954 million dollars)) in the half-year period.

Sales in March and April, the company said, were negatively affected by cold spring weather in many markets, which led to a considerable decline in sales in these two months, much below the company’s plan. Sales development was significantly better in May with an increase of 9 percent, or 11 percent, when adjusted for calendar effects.

Gross profit amounted to 26,980 million Swedish krona (3,262 million dollars) in the second quarter, corresponding to a gross margin of 57.6 percent. For the first half-year, gross profit increased to 49,679 million Swedish krona (6,008 million dollars), corresponding to a gross margin of 54.9 percent. Profit after financial items in the first half-year amounted to 10,329 million Swedish krona (1,249 million dollars) against 13,158 million Swedish krona (1,591 million dollars). Profit after financial items in the second quarter amounted to 7,002 million Swedish krona (846.9 million dollars), a decrease of 17 percent.

H&M attributed this decline to a continued negative dollar effect on purchasing costs, but also by increased markdowns and the costs of long-term investments in the quarter compared to the same quarter last year. And the fact that sales did not reach the company’s sales target for the quarter, also had a negative impact on profits.

Banks upon retail expansion for growth

The strong expansion at H&M continues both through stores and online. The company aims to increase the number of stores by 10–15 percent per year with continued high profitability. For full-year 2016 the group plans a net addition of around 425 new stores, with most of the expansion taking place in existing markets. China and the US will once again be the markets with the most new stores. H&M stores represent the largest part of the group’s planned net addition of 425 new stores. Of the group’s other brands – COS, Monki, Weekday, & Other Stories and Cheap Monday – the main focus of expansion in 2016 will be on COS.

H&M Home will also continue its rapid expansion, with around 80 new H&M Home departments. H&M Home is now available in a total of 224 H&M stores in 42 markets. In the first-half year, the group opened 184 stores and closed 31 stores, i.e. a net increase of 153 new stores. The group had 4,077 stores as of May 31, 2016, of which 171 were franchise stores.

The H&M group’s sales including VAT in the period June 1 – 21, 2016 increased by 7 percent in local currencies compared to the same period last year.

picture:hm.com