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H&M Profit Beats Forecasts, May Pay Out More Cash

Fashion retailer Hennes & Mauritz reported better than expected fourth-quarter pretax profits and December sales on Thursday, raised its annual dividend and said it could return more cash to shareholders.

H&M, celebrating 60 years of operation this year, reported a pretax profit of 5.44 billion Swedish crowns ($780.8 million) in the fourth quarter, ahead of the average of analysts' forecasts of 4.94 billion crowns given in a Reuters poll and the 4.3 billion made in the same quarter last year.

It proposed a dividend of 11.5 crowns per share, up from 9.5 crowns, and added that the board "may propose that the surplus liquidity can also be distributed."

Shares in H&M were up 5.4% at 363 crowns at 0820 GMT.

"It looks like a strong report in all aspects -- good margins and it is good to see that they are looking at a potential extra payout," said one analyst who declined to be named.

A second analyst said the launch of H&M's Home textile concept through Internet and catalog sales planned for the autumn was "a good way to boost sales." "It is absolutely positive that they have found a new way to grow."

H&M Home will sell items such as bedding, curtains, towels and cushions.

The fourth-quarter gross margin widened to 61.8% from 60% in the same period of 2005 and ahead of the 60.9% forecast given by analysts in the poll.

December sales, the first month of its financial year, were up 16% on a year ago, which compared with analysts' expectations of a rise of 13%. Like-for-like sales were up 5% in December, compared with a forecast of 3%.

EXPANSION

"The garment mixes in the autumn collections were good and the collections have been well received. This continued into December," H&M said in a statement.

It said price reductions in general were at a lower level in the fourth quarter than in the same period last year, while it also had lower marketing costs and benefited from more efficient buying.

Stock-in-trade increased by 6% over the same period last year to 7.22 billion crowns -- 10.6% of sales or 20.3% of total assets.

H&M, which in December extended a deal with pop star Madonna after tie-ups with a number of famous designers, said it planned 170 new stores in 2006/2007.

H&M also said it would open its first high-end concept store, called Collection of Style (COS), in March, on Regent Street in London. Ten stores are planned for the year.

The COS stores will carry a range of clothes for men and women that are more expensive than the mainstream H&M shops. Stores are also planned for Germany, the Netherlands and Belgium.

Sales for the full year 2005/2006 were up 12% at 68.4 billion crowns from 61.262 billion.

The firm had 1,345 stores at the end of November 2006 against 1,193 stores a year earlier.