H&M Third-Quarter Sales Exceed Estimates After Strong August

Hennes & Mauritz AB, Europe’s second-biggest clothing retailer, reported a 16 percent gain in third-quarter sales after August revenue exceeded estimates.

Sales last month rose 19 percent, stated in local currency terms, the Stockholm-based company said today in a statement, sending the shares to a record high. The average estimate in an SME Direkt survey was for expansion of 12.9 percent.

New store formats and online expansion are fueling growth at the retailer, which had 3,341 stores as of the end of August. H&M is also broadening its geographic coverage amid increasing competition from online retailers such as Asos Plc and budget chains including the U.K.’s Primark.

“Strong momentum continues,” Simon Bowler, an analyst at Exane BNP Paribas, said in a note. “Whilst this will be a positive for sentiment, it is important to understand the cost shape driving this sales momentum. We fear gross margin weakness will be a risk at the third-quarter results, as tough comparatives across the second half expose the margin pressure from an increasingly competitive value market.”

H&M shares rose as much as 2.5 percent to 310.20 kronor in Stockholm trading and were at 309.5 kronor as of 9:27 a.m.

Total third-quarter sales rose 21 percent to 45.3 billion kronor ($6.3 billion), the company said today. Excluding value-added taxes, revenue increased to 38.8 billion kronor, exceeding the 37.3 billion kronor average estimate.

H&M will report full third-quarter results on Sept. 25.