H&M Continues Expansion Although Profit Slumps 30%

Hennes & Mauritz AB (STO: HM-B) reported a disappointed fiscal first quarter earning on Wednesday, which heavily hurt by currency headwind and warm weather. However, the company is expanding online and physical stores at a rapid pace.

The Swedish fast-fashion giant said that the net income fell 30 percent to 2.55 billion Swedish kronor ($313 million) in the quarter end in Feb.29, compared with 3.61 billion kronor a year earlier. Analysts predicted net income of 3.21 billion kronor in the period.

The company said the strength of dollar increased purchasing costs and hit profit. In addition, the warm weather last quarter hit sales and increased inventory. But the company also said that the result would be better in the coming year as the strengthening of the U.S. dollar will no longer be an issue by the fourth quarter. 

“Over the full year it has a negative effect, but it’s heading in the right direction,” Mr. Persson, the H&M CEO, said.

The world’s second-biggest clothing retailer is still expanding. The company plans to reach 7000 to 8000 physical stores in the future. H&M had 2,000 stores in 2010 and now it had 3,970 physical stores. The company is going to open its 4,000th store in New Delhi this month.

“I think we will go to 7,000, 8,000 stores plus and beyond,” Persson said Wednesday in a phone interview. “We’re not stressed to reach a certain size or to be number one but it’s still expansion ahead of us.”

The company is also expanding its online stores in more countries. 11 more new countries will be added to e-commerce portfolio, including Ireland, Croatia, Slovenia, Estonia, Latvia, Lithuania, Luxembourg, Japan, Greece, Canada and South Korea.

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