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H&M continues expansion to aid recovery

By FashionUnited

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Hennes & Mauritz on Thursday raised hopes of recovery in the European retail sector with its first jump in same-store sales for eight months. Shares in the Swedish group gained more than 8 per cent after it unveiled its December sales figures with better-than-expected fourth-quarter profits.

The results suggested H&M could be turning the corner after a series of disappointing sales figures last year and raised optimism about a rebound in consumer demand. Karl-Johan Persson, H&M chief executive, said the economic outlook remained uncertain but predicted same-store sales would increase in 2010.

He vowed to press ahead with the group’s aggressive international expansion, with plans to open a further 240 stores this year in the US, Europe and Asia, after opening a similar number in 2009.

H&M, the world’s third-largest clothes retailer after Gap of the US and Inditex of Spain, has seized on the economic downturn to snap up vacant retail units. Sales rose 15 per cent in December compared with the same month in 2008, while those in stores open more than a year were up 3 per cent, compared with analysts’ consensus expectation for a 1 per cent drop.

Comparable sales fell 6 per cent in the fourth quarter, reflecting weakness in October and November. H&M said consumption remained constrained and the market driven by discounts during the three-month period but there were signs of the gloom lifting.

New store openings and favourable currency movements helped lift overall fourth-quarter sales by 6.5 per cent to Skr28bn ($3.8bn), while net profits rose 21 per cent to SKr6.2bn.

Mr Persson, the grandson of H&M’s founder, took over as chief executive in July, marking a return to family leadership a decade after Mr Persson’s father, Stefan, stepped down.

The Stockholm-based retailer, known for its “cheap chic” clothing line, generates about a quarter of its revenues in Germany.

Analysts praised an improvement in gross margins to 66.3 per cent from 62.4 per cent a year earlier but warned it would be difficult to sustain amid stiff price competition in a discount-driven market.

Source: Financial Times

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