H&M third quarter profit rises on strong summer collection sales

STOCKHOLM, Sweden - Swedish fashion retailer Hennes & Mauritz posted on Thursday a bigger rise than expected in pretax profit for its fiscal third quarter, helped by strong demand for its summer collections.

H&M has the bulk of business in Europe where consumers have held back on spending due to economic uncertainty, and H&M has also faced increased competition in its budget segment.

But its shares have soared 25 percent in the past three months on hopes margin pressure has eased after an improvement in like-for-like sales in the third quarter.

"The strong increase is due to good sales development and cost control," the company, the world's second-biggest apparel retailer after Inditex, said on third-quarter results.

Chief Executive Karl-Johan Persson said H&M's summer collections had sold well, particularly in Asia but also in a number of European market, and markdowns weighed less on gross margin than in the second quarter.

The gross margin in the June-August period rose more than expected to 58.8 percent from 58.2 percent a year earlier, against forecast in a Reuters poll for 57.9 percent. Zara owner Inditex reported last week a drop in first-half gross margin to 58.6 percent.

Pretax profit stood at 5.83 billion crowns ($907 million) against a year-ago 4.90 billion and a mean forecast for 5.53 billion. H&M had already unveiled an 11 percent rise in turnover.

H&M said sales in the first 24 days of September, the first month of its fiscal fourth quarter, were up 8 percent year-on-year in local currencies.

It said its online store in the United States, launched on Aug. 1, had got off to a good start.

($1 = 6.4305 Swedish crowns)