H&M profits up by 7 percent in 2012

H&M Group has closed 2012 with a year on year increase in profits of 7 percent or 1 billion Swedish kronas (116.36 million euros). The fashion retailer will focus on enhancing its online shopping experience and nurturing their product range with new brand

& Other Stories. More international openings for both H&M and COS to be seen in 2013.

“We increased our profits by 1 billion Swedish krona – i.e. an increase of 7 percent compared to the previous year – despite negative effects from large long-term investments and currency translation effects. Our long-term investments relate to a number of areas such as online shopping, IT, a completely new brand & Other Stories and future broadening of the product range. These long-term investments have created cost increases and to a great extent have not yet generated any revenue. However, we consider these investments to be both necessary and wise as they aim to secure future expansion and profits and thereby further strengthen H&M’s position,” summarised CEO Karl-Johan Persson when unveiled the full year report on Wednesday.

The H&M Group’s sales including VAT increased in local currencies by 11 percent during the financial year, while sales in comparable units increased by 1 percent. Converted into local currency, the Swedish krona, sales excluding VAT amounted to 120,799 million. This implies an increase of 10 percent.

Gross profit amounted to 71,871 million Swedish krona, corresponding to a gross margin of 59.5 percent (60.1).

Profit after financial items totalled 22,285 million Swedish krona and the group’s profit after tax increased by 7 percent to 16,867 million or 10.19 kronas per share. Profit after tax increased by 1 billion Swedish kronas despite negative effects from H&M´s long-term investments and negative currency translation effects, explained the company on Wednesday.

2012 last quarter proved to be a strong one for the Swedish fashion retailer, as it reported sales including VAT increased by 9 percent in local currencies to a total of 32,502 million kronas. Gross profit amounted to 20,017 million, what corresponds to a gross margin of 61.6 percent. Profit after financial items amounted to 6,636 million Swedish krona and in the meantime, group profit after tax was up to 5,287 million krona or 3.19 krona per share. Profits after tax were affected by large long-term investments as well as negative currency translation effects of approximately 240 million krona, highlighted the company.

With regards to the coming months, Karl-Johan Persson, CEO of H&M Group commented that “Our long-term investments relate to a number of areas such as online shopping, IT, a completely new brand & Other Stories and future broadening of the product range. These long-term investments have created cost increases and to a great extent have not yet generated any revenue. However, we consider these investments to be both necessary and wise as they aim to secure future expansion and profits and thereby further strengthen H&M’s position.”

Despite the challenging macro-economic entourage, the Swedish fashion retailer is “looking forward to an exciting 2013 full of opportunities. We have the greatest respect for the macro-economic climate and how it may affect the consumption in many of our markets, but we have a strong belief in our offering and are convinced that H&M will continue to maintain its strong position.” Sales in January 2013 are expected to increase by 5 percent in local currencies compared to the same month last year. From mid-January onwards, sales were negatively affected by very cold weather in many of H&M’s markets in Europe.

“H&M continues to stand strong in a challenging clothing market which in many countries has been even more challenging in 2012 compared to 2011. The fact that we increased sales by 11 percent in local currencies and 1 percent in comparable units whilst continuing to gain market share proves once again that customers appreciate our collections, which offer a wide range of inspiring fashion for everyone,” Persson showed thus his satisfaction with the group´s performance for the year.

H&M plans a net addition of around 325 stores for the financial year 2012/2013, with Chile, Estonia, Lithuania, Serbia and, via franchise, Indonesia becoming new H&M markets in 2013. It would be Oslo, Norway and in Dubai, UAE forH&M´s sister brand COS though. “The strong pace of expansion is continuing in 2013 with a planned 325 new stores net. This means that we will effectively be opening a new store every day. In 2013 the highest rate of expansion will again be in China and the US. The new H&M countries in 2013 will be Chile, Estonia, Lithuania, Serbia and Indonesia. We are very much looking forward to the spring when we will be able to offer our customers a completely new fashion brand with the opening of the first stores of & Other Stories,” added Persson.

Finally, the new fashion brand & Other Stories will open its first stores during spring 2013 in Spain, Germany, Denmark, UK, Italy, France and Sweden. & Other Stories will also be available via online sales in these countries as well as in Belgium, the Netherlands and Finland at stories.com.