Summer collection boosts H&M

STOCKHOLM, July 15 (Reuters) -- Swedish fashion retailer Hennes & Mauritz AB said on Monday its sales surged 19 percent year-on-year in June thanks to good demand for its summer collection in all markets.

The rise is well above market expectations of a 12.7 percent rise and came on top of a 13 percent sales increase in May.

"We have had a good development on all markets. There is the summer collection which we have in all the shops and which has turned out to be a very good one,'' Carl-Henric Enhorning, head of Investor Relations, told Reuters.

Enhorning said that H&M, the world's largest clothing retailer by market capitalisation, did not open any new shops in June, but was on track with its expansion plans to add 55 new outlets to its existing 801 stores in 14 countries.

H&M's June sales outpaced those of U.S. sector peer GAP, which posted its 27th straight month of declining same-store sales on July 11. Local competitor JC also showed a decline in June sales of 4.3 percent.

The sales figures boosted H&M shares 3.7 percent at the start of trade on the firmer Stockholm bourse, ending a two-session losing streak in which they lost nearly seven percent as the broader market fell.

The stock was outperforming the DJ Stoxx Retail index by 1.9 percent in early Monday trade, but has underperformed it by 0.3 percent since the start of the year.

H&M was only a year ago the most highly valued company in its sector worldwide, but has seen its share fall 17 percent so far this year, despite better-than-expected fiscal second-quarter results, because of the bearish mood on equity markets globally.

Judging from its 2003 price-to-earnings ratio (P/E), investors prefer American GAP and Spanish Inditex, with its fashion chain stores Zara, to H&M.

While H&M's P/E only reaches 24.3, Inditex trades at 29.7 and GAP at 46.5, indicating investors believe GAP capable of stronger growth than H&M and Inditex. The higher the ratio, the more investors are willing to pay for a share in a company's future earnings.