Photographer: Nicky Loh/Bloomberg

H&M Sees Dollar Sourcing Headwinds Easing by End of Year

  • Currency woes should ease by fourth quarter, CEO Persson says
  • Sales rose 2% in March, hurt by markdowns and earlier Easter

Hennes & Mauritz AB said headwinds from the strong dollar will ease by the end of the year and the Swedish fashion retailer reported first-quarter profit fell less than analysts expected. The stock rose as much as 5.5 percent.

Earnings before interest and tax were 3.27 billion kronor ($400 million) in the three months through February, H&M said Wednesday. Analysts predicted 3.21 billion kronor. The gross margin narrowed to 52 percent from 55.2 percent, also exceeding estimates.

The fast-fashion retailer gets about 80 percent of its products from Asia, where the greenback’s strength has inflated the cost of purchases of garments, as many currencies in the region are linked to the dollar. That effect should disappear by the fourth quarter, H&M said Wednesday.

“This was clearly a very difficult quarter even if it wasn’t quite as difficult as expectations,” Anne Critchlow, an analyst at Societe Generale, said. Slowing sales have also forced H&M to discount more merchandise.

Sales rose 2 percent including in local currencies in March, H&M said, a soft start to its quarter due to unfavorable weather and the early falling of Easter. 

“Total sales in March, April and May should be seen together, since Easter and weather effects during this period affect the comparability of an individual month,” Chief Executive Officer Karl-Johan Persson said in a statement.

The company said it would open its 4,000th store this month, in New Delhi -- a doubling of its store base from 2,000 in 2010. H&M said it will bring online sales to 11 new countries this year, including Ireland and Japan.

The shares were up 4.5 percent at 277.1 kronor at 10:45 a.m. in Stockholm.

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