New ranges help H&M achieve profits boost

Clothing retailer Hennes & Mauritz today unveiled plans for further expansion after it posted forecast-beating gains in 2006.

The Swedish company, which has benefited from a well-received autumn collection, will open 170 new stores in the current year, the majority of which are expected to be in the UK, the US, Spain, Italy, Germany and Canada.

The news came as the group posted pre-tax profits of 15.8 billion kronor (€1.7bn) for the year to November 30, a rise of 17% from 2005, and 3% ahead of expectations. Underlying group sales grew 12% to 68.4 billion kronor (€7.5bn).

The popularity of H&M’s autumn collection, which included a one-off collection designed by Dutch designers Viktor & Rolf, saw fourth-quarter sales increase by 8% to 19.5 billion kronor (€2.2bn). Pre-tax profits rose by 27% to 5.4 billion kronor (€595.4m).

The group said comparable store sales also climbed without the need to resort to heavy discounting to offload winter clothing despite the warmer winter weather.

It added that marketing costs for the fourth quarter were lower than in 2005, when an increased marketing campaign was used to boost flagging winter sales.

H&M said its “selection of sourcing countries” had lowered buying costs and boosted margins during the year.

Sales for December were also ahead – up 16% on last year.

The first H&M store opened in Sweden in 1947 and it has since made an international name for itself as a low-cost fashion retailer.

But recent successes have seen the group move into new arenas and it plans to open its first higher-priced store chain under the brand name COS – Collection of Style. The first COS store will open on London’s Regent Street in March.

In addition, the H&M group is also launching a home textiles range – H&M Home, including bed linen, sheets, curtains, towels, cushions and blankets. It will be launched, initially, through online and catalogue sales in the Nordic region.

During the year H&M added 152 stores, bringing its total to 1,345, including four stores in the Middle East as part of a franchising collaboration with Alshaya.

The company said it received a “good reception in these markets” with a great deal of interest from customers and the media.

It added that preparations to enter the Japanese market, with a store opening in Tokyo in 2008, were progressing well.

Analysts at Citigroup said: “H&M’s recent gross margin performance is impressive.”

H&M shares rose by more than 6% to record levels in trading today.