Wednesday evening business bulletin

Jun 18 2008 By Andrew Mernin

Fashion retail group H&M enjoyed a 14% rise in like-for-like sales last month as warmer weather tempted in more shoppers for its summer ranges.

Total sales rose by a quarter during the month, the European firm said, in some rare good news from the high street.

H&M, which is the world’s third largest fashion retailer with 1,593 stores in 29 countries, has 137 outlets in the UK, making it the group’s second biggest market after Germany. The flagship UK store is on Regent Street in London, with other major sites in Leeds, Glasgow and Manchester.

Last month’s sales boost helped the firm’s total revenues rise by 8% to 21.6 billion Swedish krona (£1.8bn) during the second quarter to May 31. Profits after financial items were up 6% during the period to 5.4 billion krona (£456m).

But sales growth appeared to have slowed during the first half, despite today’s boost. Revenues rose 12% during the six months to 41.3 billion Swedish krona (£3.5bn), with profits 9% ahead at 9.5 billion Swedish krona (£800m).

Sales growth for both periods in the UK was 8% year-on-year. No UK breakdown for May was available.

London’s leading share index plunged 1.5% into the red today with disappointing first quarter figures from Sainsbury’s and Woolworths hitting retailers hard.

The FTSE 100 Index dropped 90.2 points to 5771.7 in mid-session trading, with the retail woes compounding a sell-off sparked by a more than 100 point drop overnight on Wall Street’s Dow Jones Industrial Average.

Housebuilders joined retail stocks in London feeling the heat today after Goldman Sachs said the market was only at the start of a deep downturn, which could last up to three years.

Prospects for the sector were also impacted by minutes of the last Bank of England meeting on interest rates, which put back further any hopes for a cut as it revealed some policymakers mooted a rise.

There was some mixed news from the manufacturing sector today after a survey showed a big proportion of firms were planning further price rises but enjoyed an increase in their under pressure order books this month.

The CBI said a balance of 28% of companies expected to put prices up over the next quarter.

The figure was 2% down on the previous month, which was the highest reading for 13 years, but still remains at the top end of survey history.

Despite the inflationary pressure, respondents said their business had improved over the past month with plus 1% reporting their order books were ``above normal" in June. This compared to 10% who said order levels were below normal in May.

A balance of 2% of firms also said their volume of output was expected to increase over the coming quarter, up from zero last month.

The pound at 4pm was US$1.9594 compared to US$1.9533 at the previous close while the euro at 4pm was £0.7918  compared to £0.7938 at the previous close.