Swedish fashion chain Hennes & Mauritz AB on Thursday posted a near 15 percent drop in third-quarter net profits mainly on the back of rising procurement costs, a bump-up in the expansion of new stores, a lower U.S. dollar as well as marketing investments.
Still, considering an unusually warm seasonal start for its autumn collection and the financial jitters that are currently spreading across the world, the results pleased market watchers and the H&M share price jumped 3.5 percent to 202.70 kronor ($29.99) in early trading on the Stockholm stock exchange.
The Stockholm-headquartered group reported a net profit of 3.6 billion kronor ($533 million) in the June to August period, down from 4.2 billion in the same three months a year ago.
Sales rose slightly however to 31.51 billion kronor from 31.48 billion in the corresponding quarter in 2010. The company labeled its sales numbers "satisfactory" considering large parts of Europe had experienced a warmer-than-usual start to the autumn when its seasonal collection became available in its stores.
The company also noted that competition within the industry continues to be tough, especially when it comes to the pricing of clothes. This trend continued into the third quarter and was more challenging than in the same period last year, it said.
But the group's CEO Karl-Johan Persson said H&M continues to gain market share.
"In this situation, it is extra important to have a long-term perspective and to always make sure that we give customers the best combination of fashion and quality for their money in every market," Persson said.
For the full financial year 2011, H&M will add 265 new stores to its business and both Indonesia and Thailand are scheduled to become new H&M franchise markets next year.