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H&M Q2 Profit Falls Amid Stronger Krona, Bad Weather

HENNES MAURITZ 061913

Swedish apparel retailer Hennes & Mauritz (HNNMY.PK, HMRZF.PK, HEN.L) Wednesday said profit in the second quarter declined from the prior year, hurt by negative currency impact and unfavourable weather.

CEO Karl-Johan Persson said, ''This quarter has been marked by substantial negative currency translation effects, which have had a negative impact on both sales and profits in SEK.''

Profit after tax fell to 4.66 billion Swedish kronor ($0.72 billion) from last year's 5.22 billion kronor.

Quarterly profit after financial items amounted to 6.125 billion kronor, while it totaled 7.05 billion kronor a year earlier.

Group sales, including Value Added tax or VAT, grew by 5 percent in local currencies. But, converted into SEK, sales excluding VAT slid to 31.635 billion kronor from 31.658 billion kronor. Sales in comparable units decreased 4 percent.

H&M noted that the results were hit by negative currency translation effects as the Swedish krona strengthened against most sales countries' currencies.

The reported sales of 36.923 billion kronor, including VAT, would have been higher by 1.8 billion kronor using the same currency rates as last year.

While sales remained strong in Asia, overall sales were affected by the challenging situation for the fashion retail industry. Added to this, unfavourable weather in March and a couple of weeks into April in many of the company's big markets also affected sales.

Gross margin fell to 61.1 percent from 61.7 percent, amid increased markdowns.

For the first half of the year, profit after financial items dropped to 9.359 billion kronor from 10.754 billion kronor in the prior year. Sales including VAT increased in local currencies by 5 percent while sales in comparable units decreased by 4 percent.

According to the retailer, sales got off to a good start in June and increased 14 percent in local currencies in the period between June 1 and June 17.

The stock closed marginally higher in Stockholm on Tuesday at 224.90 kronor.

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