H&M December Sales Increase 8%, Beating Analyst Estimates

Hennes & Mauritz AB, Europe’s second-largest clothing retailer, reported sales growth that beat analysts’ estimates for a second consecutive month as the chain offered markdowns in advance of the Christmas holiday.

Total December sales rose 8 percent from a year earlier, the Stockholm-based company said in a statement today, exceeding the 5.1 percent average estimate in an SME Direkt survey. Revenue from stores and operations open at least a year fell 2 percent, also better than the SME consensus of a 4.1 percent decline. H&M’s November revenue beat estimates after a designer collection went on sale midway through the month.

“It’s better than expected, and quite a bit better than the German market background might have suggested,” Anne Critchlow, an analyst at Societe Generale SA in London, said in a phone interview. “The markdowns did seem strong this year.” The company may give some indication as to whether these sales were achieved through stronger discounting when it reports fiscal full-year earnings on Jan. 30, she said.

The retailer, which sells jeans for 20 euros ($27) and dresses for 30 euros, started discounts of as much as 50 percent before the Dec. 25 holiday. JPMorgan Chase & Co. said in November that demand from German consumers may be weakening, a risk for H&M as the company gets about 23 percent of sales from Europe’s biggest economy.

German GDP

Gross domestic product growth in Germany slowed to 0.7 percent in 2012 from 3 percent in 2011, according to figures released today.

H&M gained as much as 4.6 percent to 230.3 kronor, the biggest intraday advance since June 20, and traded up 3.5 percent at 10:47 a.m. in Stockholm. The stock has gained 3.7 percent in the past 12 months, valuing the retailer at 377.4 billion kronor ($58.5 billion).

“External factors on gross margin should now be working in the company’s favor, for example the lagged effect from lower cotton prices in the first half and the stronger euro in the second half,” analysts including Richard Chamberlain at Bank of America Merrill Lynch wrote in a report today. “We expect H&M to hold its dividend due to its strong cash position.”

Sales in December were held back by a negative calendar effect of about 3 percentage points, H&M said. The number of outlets rose to 2,809 as of Dec. 31 from 2,490 a year earlier.

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