H&M third quarter pretax profit matches expectations

The world’s second-biggest fashion retailer, which has 254 stores in Britain, said its United Kingdom sales jumped 21% to 4,104 Swedish kronor (£319 million) in the three months to the end of August compared to a year ago as its collections were well received across its brands.

H&M’s sales in China grew 11% in the third quarter in local currencies. When the weather became more normal in September, sales took off again and the firm looks forward to an exciting fashion autumn. The Swedish clothing company has already launched 299 stores there this year and is showing no sign of trepidation in expanding in the region despite a third quarter slowdown in the market.

Chief executive Karl-Johan Persson, said: “Profits have developed well during the first nine months of the year, although profits in the third quarter were negatively affected by increased purchasing costs due to the strong USA dollar”.

Inditex last week reported an improvement in its gross margin for the first half, which ran through July, plus an acceleration in sales.

Like other retailers who purchase from Asian manufacturers, H&M’s profits this quarter were “negatively affected by increased purchasing costs due to the strong USA dollar”, Persson continued. Notably, Inditex is losing less to the brawny dollar because it produces most of its clothing in Southern Europe, where garment materials are less likely to be bought and sold with the American currency.

Some analysts have warned that H&M’s growth strategy – which heavily relies on opening more stores – could come under pressure as markets saturate.

It also reiterated plans to open about 400 new stores this year, including 240 it expects to open in the fourth quarter, nearly three new stores a day.

Net revenue of 46.02 billion kroner ($5.47 billion), up 18.6% from 38.81 billion kroner ($4.62 billion) during the same time a year ago.