H&M posts another month of strong sales growth

[STOCKHOLM] H&M (Hennes & Mauritz), the world's second-biggest fashion retailer, reported a better than expected 15 per cent sales rise in February, a fifth straight month of double-digit growth and a boost to its shares.

Analysts had on average forecast a 13 per cent increase in sales in local currencies. H&M shares were up 2.1 per cent at 0825 GMT following the sales report, outperforming the European retail sector which rose 0.7 per cent.

The Swedish budget fashion retailer said net sales in December through February, its fiscal first quarter, rose 25 per cent to 40.3 billion crowns (US$4.6 billion) excluding sales tax, again beating an average forecast of 39.2 billion. That figure was boosted by the weak Swedish crown.

H&M, which is due to report full quarterly results on March 24, did not provide further details.

H&M is investing heavily in ecommerce and new concepts such as sportswear, designer collections and higher-end brands including COS to try to protect margins over the long term as discount chains Primark and Forever 21 push prices down.

Societe Generale analyst Anne Critchlow said the latest figures suggested like-for-like sales growth of 6 per cent for the quarter, driven by price investment, range extensions, new non H&M formats and a faster roll-out of online. "H&M is a solid 'Hold' for us, not quite enough upside to become more positive, but a good year of EPS (earnings per share) development ahead," Ms Critchlow said.

H&M, which plans to open about 400 new stores this fiscal year, said it had 3,551 stores at the end of February, up from 3,192 a year earlier.

The sales figures come two days before bigger rival Inditex , the owner of higher-priced brands Zara and Massimo Dutti, unveils results for the full year to January.

H&M shares trade at 24.5 times forecast earnings, against 30.7 for Inditex, a reflection of analyst expectations its margins will be under pressure this year due to investment and currency translation effects.

REUTERS