Photographer: Nicky Loh/Bloomberg

H&M Profit Misses Estimates as Dollar Increases Garment Costs

Hennes & Mauritz AB reported second-quarter profit that missed analysts’ estimates as Europe’s second-biggest clothing retailer battled with the strength of the U.S. dollar, which raised garment costs.

Net income rose 11 percent to 6.45 billion kronor ($783 million) in the three months through May, Stockholm-based H&M said in a statement on Thursday. The average estimate of 13 analysts surveyed by Bloomberg was for a profit of 6.49 billion kronor. The gross margin weakened to 59.4 percent from 60.8 percent a year earlier.

The vendor of $9.95 beach dresses and $12.95 espadrilles has warned that the U.S. dollar will add to purchasing costs this year, particularly in the second half. That currency has strengthened 7.9 percent against the euro and 5.5 percent against the krona this year.

Sales in the first weeks of June rose 14 percent in local currencies, H&M said. The retailer last week reported that second-quarter sales, excluding value-added tax, increased 21 percent to 45.9 billion kronor.