September 24, 2015 / 6:16 AM / 5 years ago

H&M sales recover in September after weak August

STOCKHOLM/BERLIN (Reuters) - Hennes & Mauritz on Thursday reported a sales rebound in September after hot late summer weather hit August trading and said the strong U.S. dollar had affected its purchasing costs into the fourth quarter.

Last week, the fashion retailer had reported its weakest monthly sales growth in more than two years for August, which H&M said was due to unseasonably warm weather in its main European markets.

“When the weather became more normal in September, sales took off again,” Chief Executive Karl-Johan Persson said in a statement.

The world’s second-biggest fashion retailer said sales from Sept. 1 to Sept. 22 rose 12 percent in local currencies, up from a rise of just 1 percent in August.

Last week, rival Inditex reported a brisk start to the autumn season, with sales in local currencies in the six weeks to Sept. 10 up 16 percent.

“Current trading looks a bit slower than consensus had hoped at this stage,” Societe Generale analyst Anne Critchlow said.

H&M shares dropped 1.7 percent by 1042 GMT, slightly underperforming a 1.3 percent slide in the STOXX Europe 600 Retail Index. Its shares had already underperformed Inditex and the broader sector over the past month.

H&M’s gross margin fell to 55.9 percent in the third quarter from 58.3 percent a year ago, largely due to the strong U.S. dollar pushing up purchasing costs but also due to increased discounting, particularly in August.

Inditex reported a gross margin of 58.1 percent for the February to July period.

H&M said: “Since the US dollar strengthened further during the purchasing period for the fourth quarter, the purchasing costs for the fourth quarter have continued to be negatively

affected.”

In June, H&M had said it expected the strong dollar to lead to a rise in purchasing or sourcing costs this year. The retailer buys most of its clothes in Asia on U.S. dollar contracts while selling most of them in Europe. It is more exposed to dollar strength than bigger rival Inditex.

The Swedish company’s pretax profit was largely unchanged at 6.94 billion crowns (£541 million) in the June to August quarter from a year earlier compared to a mean forecast in a Reuters poll of analysts for 6.93 billion.

A shopper walks out of the H&M store in New York, November 26, 2013. REUTERS/Lucas Jackson

H&M, which has been slower to expand online than Inditex, said it planned to extend e-commerce to another nine markets including Japan and Ireland in the next financial year on top of the 23 markets it will cover this year.

It also reiterated plans to open about 400 new stores this year, including 240 it expects to open in the fourth quarter, almost three new stores a day.

Persson said new H&M beauty products launched recently in around 700 stores in 28 markets and online had got off to a good start and a roll-out was planned to a further 14 markets soon.

Editing by Jane Merriman

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