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H&M posts better profit and margins

FASHION chain Hennes & Mauritz posted better-than-expected profit and margins for the second quarter yesterday, and said currency swings were becoming less costly.

The world's third-biggest clothing retailer by sales said its gross margin - a key measure of cost control - came in at 61.0 percent, beating analysts' forecast of 60.2.

"Let's call it a very solid report from H&M (Thursday) where a lot of focus was on the gross margin," said Soren Lontoft Hansen, an analyst at Sydbank.

H&M said second-quarter price markdowns were the same as a year earlier, and currency hedges continued to put downward pressure on the gross margin. But those effects were less damaging than in the first quarter and were expected to decrease further in the current quarter.

H&M has, along with Spain-based rival Inditex, done better than mid-market peers such as Britain's Next and Marks & Spencer because of their focus on low-cost, fast-moving fashions and their international footprints, and the Swedish retailer is seen as well positioned to weather the downturn in consumer spending.

Pretax profit rose 6.4 percent to 5.78 billion crowns (US$735 million) in the quarter ended May 31, versus a mean forecast of 5.67 billion crowns in a Reuters poll.

Hansen said hedging and a stronger dollar still weighed on H&M, but the company managed to compensate by curbing transport and raw material costs. "And I think that going forward we will see H&M having some economies of scale in terms of sourcing," he added.


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