H&M Sales Rise Fast Before Cavalli Launch


Hennes & Mauritz beat expectations with a 25% year-on-year rise in September sales, its second-strongest figure in five years, signaling a buoyant reception for its winter fashions and online shops.

The world's third-largest apparel retailer, famed for rapidly reproducing catwalk styles at high street prices, said on Monday sales for comparable stores -- open at least a year -- rose 12% in September versus a 1% fall in August.

"This represents the second strongest figure in the last 5 years only beaten by 29% growth in March 2007," Deutsche Bank analysts, who have a "buy" on the stock, said in a note.

"The main drivers seems to be very healthy market conditions but also strong online performance."

The sales are considered potentially good news for the rest of the quarter, with a collection by Italian designer Roberto Cavalli, who dresses celebrities like Paris Hilton and Elizabeth Hurley, to be launched in November.

H&M shares were the biggest gainer among European retailers, up 1.2%. Shares at rival Inditex, the world's number-two apparel retailer, were down 0.1%.

H&M does not release figures for the value of sales or provide comment but analysts said the figures indicated new ranges -- such as wool coats and pencil skirts -- had been well received.

The strong rise in total sales, up from an 11% rise the previous month, also suggested recent online launches in Germany and Austria had gone well, analysts said.

Celebrity Fashion

Luca Solca, an analyst at Bernstein Research, said he expected H&M to perform strongly through the end of this year and into the next thanks to the launch of the Cavalli collection and the expansion of its online sales.

But he still preferred H&M's rival Inditex, owner of the Zara fashion chain, in part because it steered clear of the celebrity endorsements favored by H&M, which has previously launched capsule collections by Madonna and Kylie Minogue.

"Without relying on celebrities, there is less volatility at Inditex going forward," Solca said.

H&M, marking its 60th year in business, was expected to post strong September numbers after a weak August, but the figures topped analysts' expectations. Twelve analysts polled by Reuters had forecast total sales in September up 20.8% with like-for-like sales up 9%.

The underwear-to-suits retailer said in its third-quarter earnings report last month that sales started well in September, with its autumn collections well received by shoppers.

Expectations of strong sales were reinforced by figures from German industry group Textilwirtschaft, which showed a 14% rise in clothing sales in September in Germany, H&M's biggest market.

The company has launched several new initiatives this year, opening its first stores in Asia, expanding online sales and starting its higher-priced Collection of Style chain.

But it has said it will delay the launch of its H&M Home venture to autumn 2008 because it needed more time to develop the concept.