H&M 3Q profit rises 25 percent

Hennes & Mauritz AB, Europe's second-largest clothing retailer, said Wednesday its third-quarter net profit jumped 25 percent, boosted by high summer sales.

Net income for the three months ending Aug. 31 came to 3.17 billion kronor ($486.47 million), up from 2.54 billion kronor in the same period a year ago. Third-quarter sales, including value added tax, rose to 22.03 billion kronor ($3.39 billion) from 19.61 billion kronor a year ago.

H&M shares rose 3.07 percent to close at 402.50 kronor ($61.91) in Stockholm.

The Stockholm-based company said it expected its autumn collections to be well received, since September sales had so far "have been very satisfying." The launch of a Web site and catalog sales in Germany and Austria, which began in August, has also begun very well, it said.

Hennes & Mauritz said it still planned to open 170 new stores during this financial year. In the fourth quarter, 83 new stores are planned in the U.S., France, Britain, Germany, Spain and Italy.

The launch of H&M Home, however, has been postponed to the second half of 2008 because "more time is needed to develop the concept," the company said.

H&M's gross margin increased by two percentage points in the quarter, to 61.2 percent, mainly thanks to a better procurement process, a more favorable U.S.-dollar exchange rate as well as a decrease price cuts.

Investment costs almost doubled to 2.39 billion kronor ($366.76 million) from 1.26 billion kronor due to an increased focus on store design, refurbishment's and the increased pace of new store openings.

Swedbank analyst Stefan Stjernholm in Stockholm said the report was somewhat off market expectations, mainly because of the higher costs, but still held some highlights.

"There are some good things and some that are not so good," he said. "Gross margin was bigger and higher than hoped, but the costs were somewhat higher."

Stjernholm, however, called the expenses "good types of costs."