H&M Q3 turnover increase of 9 per cent

Total turnover excluding VAT for the H&M Group increased by 9 per cent during the first quarter (12 per cent with comparable exchange rates) and amounted to SEK 11,756.1 m (10,770.6). Turnover including VAT was SEK 13,807.0 m (12,635.7).

Turnover increase in the month of February was 13 per cent excluding exchange rate fluctuations. H&M opened seven stores during the first quarter, of which three were in Germany, one each in UK, Belgium, France and the USA. Four stores were closed, bringing the total number of stores to 948. During the same period last year six stores were opened and one was closed.

Profits Gross profit amounted to SEK 6,311.4 m (5,858.2), which corresponds to a gross margin of 53.7 per cent (54.4). After deduction of administrative and selling expenses, operating profit for the first quarter amounted to SEK 1,700.6 m (1,558.3), an increase of 9 per cent. This corresponds to an operating margin of 14.5 per cent (14.5).

Operating profit for the period has been charged with depreciation according to plan amounting to SEK 307.7 m (284.1) and start-up costs, the part of investments in new stores that is charged directly to the income statement, of SEK 49.2 m (33.8). Group financial net interest income was SEK 87.2 m (131.1). Profit after financial items was SEK 1,787.8 m (1,689.4). Profit after estimated tax was SEK 1,162.1 m (1,098.1), corresponding to earnings per share of SEK 1.40 (1.33).

Expansion The Group plans to open 51 shops during the second quarter, the biggest part of the expansion takes place in Germany with eight openings, the UK and Poland with six each, Spain with five openings and Norway with 4 openings. Three shops will close during the quarter. In the corresponding period last year, 47 new stores were opened and three were closed. The H&M Group has aquired the american clothing chain GAP's german subsidiary. H&M Group takes over all of GAP's 10 stores in Germany including employees. Take-over date is August 1, 2004. The store will be converted into H&M-stores with expected opening under H&M management during the autumn. During 2004, approximately 140 new stores will be opened and ten will close.

Comments on the Results The group has, during the first quarter, increased turnover by 12 per cent with comparable exchange rates. Sales price to customer on new items, has as a result of the weakening of the USdollar during the same period decreased by approximately 5 per cent, all in all the number of sold items has increased by approximately 20 per cent. The increase in selling and administration expenses has been kept at a low level during the quarter. Gross margin for the period was 53.7 per cent (54.4). The somewhat higher reduction level was, compared to last year, partly counteracted by an underlying strengthened margin due to the weakening of the US-dollar and somewhat lowered logistic cost. Price reductions were on a historically low level.

The result of the quarter has been negatively affected by currency translation effects by SEK 36 M, compared to the same period last year. The currency translation effects arise when the results of foreign subsidiaries are translated into SEK in order to be consolidated into the H & M Group accounts.

Financial Position Group balance sheet total increased by 5 per cent and was SEK 26,510.0 m (25,195.7). During the period, the Group generated a positive cash flow of SEK 417.2 m (74.3). The financial assets amounted to SEK 13,783.9 m (13,492.3). Stock-in-trade was SEK 5,129.8 m (4,368.0), an increase of 17 per cent (-5). SEK 254.5 m (263.0) were invested in the operations through acquisitions of fixed assets. Group solidity was 81 per cent (79) and the share of risk-bearing capital was 85 per cent (83). Net worth apportioned on the outstanding 827,536,000 shares on 29 February 2004, corresponded to SEK 26.00 (24.17) per share.