(Filed Under Financial and General Interest News). Hennes & Mauritz AB reported that rising textile and manufacturing costs led to an 18 percent drop in net profit for the second quarter ending May 31.
Net income fell to 5.75 billion Swedish kronor (approximately $917 million) from 7.04 billion kronor ($960 million) compared to the same period in fiscal 2010. H&M’s gross margin narrowed to 61.7 percent of sales in the quarter down from 65.9 percent a year earlier as the company faced increasing prices of cotton and manufacturing wages in Asia, where nearly 75 percent of the retailer’s garments are produced.
Despite falling short of analysts’ expectations, H&M executives remained confident regarding the company’s growth. "We are optimistic about the future for H&M, despite challenging conditions both in the sales markets and in the sourcing markets," Chief Executive Officer Karl-Johan Persson said in a statement. H&M will open 178 stores in China, the U.K. and the U.S. in the second half of 2011, with U.S. online sales a possibility as early as March 2012.
Hennes & Mauritz AB is currently operating 2,297 retail outlets, including COS, Monki, Weekday and Cheap Monday stores.
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