H&M Misses Q3 Forecast, Delays U.S. E-Commerce Start

Singer Lana del Ray is the face of H&M’s fall campaign.

Stockholm—H&M missed its third quarter profit forecast and reported today that it will delay the launch of its U.S. e-commerce until Summer 2013.

For the quarter ended August 31, H&M posted a 0.8% rise in its net profit to 3.62 billion Swedish kronor (about $549.0 million) from 3.59 billion kronor a year ago. That was below analysts’ average estimate for a net profit of 3.94 billion kronor.

Total sales excluding value-added tax (VAT) rose to 28.81 billion kronor, up from 26.91 billion kronor a year earlier. Operating profit increased to 4.80 billion kronor from 4.71 billion, but below a forecast of 5.15 billion kronor.

“Conditions for the fashion retail industry continued to be challenging in many markets in the third quarter — both as regards the weather and the macroeconomic climate, with austerity measures and restrained consumption,” said H&M CEO Karl-Johan Persson said, adding that lower than expected sales could “primarily” be blamed on an unusually hot August in Europe, H&M’s biggest market.

But H&M also faced the specter of spending curbs as unemployment remains high in many European countries. H&M also was hit with expansion costs related to opening 300 stores this year to add to its 2,600 stores worldwide. Since it make most of its purchase in relatively strong U.S. dollars, sells mostly in weaker euros and then has to translate those back to Swedish kroner which has surged this year.

Although H&M said that China and the United States will be its largest expansion markets this year, the company said today it would delay its launch date for U.S. online saying it “needed more time.”

& Other Stories to Open First Stores in Spring 2013

On the subject of its much anticipated, higher end specialty store chain & Other Stories, H&M said it will launch in “selected European countries” beginning in Spring 2013 and online at www.stories.com.

H&M released this mood board for its & Other Stores store concept.

Commenting on & Other Stories, H&M described the store as a “new brand aimed at women with an interest in fashion who want to create their own personal style, and focuses on the total look. & Other Stories will offer a broad range of shoes, bags, jewelry, beauty products, lingerie and clothes — everything in carefully selected qualities with great attention to details.”

While H&M continued to grow its market share, total gross margin fell to 58.2% from 58.6% which Daniel Ovin, an analyst at CAI Cheuvreux Nordic called disappointing. “I would have thought that the lower cotton prices would have helped there,” he said.

For its sales so far this quarter, they are up 14% from Sept. 1 to 25, adjusting for calendar effects and currency shifts, the company noted today.

Espirito Santo Investment Bank analyst Caroline Gulliver said: “H&M is still a good growth company, and on a normalized currency basis we expect sustainable profit growth of 11 to 12% driven by new store openings.”

 

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