Hemtex reports continued strong growth and increased profitability

Hemtex’s interim report for the first nine months of the 2006/2007 fiscal year shows that the trend in the Group’s expansion and profitability remains strong. Growth is being driven by the establishment of new Hemtex stores and the acquisition of franchise stores. Profitability has improved as a result of increased sales combined with a stronger gross margin.

During the third quarter of the fiscal year, the period from November 1, 2006 through January 31, 2007, net sales increased by 33% to SEK 501.2 million. At the same time, operating profit rose by 35% to SEK 112.3 million, generating an operating margin of 22.4%.

“On the whole, Hemtex reports strong earnings, combined with healthy growth and improved profitability. The effect that the increase in our direct purchasing is having in the form of an improved gross margin is particularly noticeable,” says Anders Jansson, President and Chief Executive Officer.

Hemtex continues to maintain a high rate of establishment. During the third quarter, the Group opened 13 new stores and also acquired 12 stores from franchisees. During the first nine months of the fiscal year, the Group opened a total of 29 new stores. Sales in comparable stores declined by 1% during the quarter, essentially as a result of weaker market conditions.

“We are convinced that our concept will work in additional markets, as confirmed by the successes noted in Finland and the promising start in Norway. Accordingly, we have decided to take an initial step into the Baltic countries by opening a store in Pärnu in Estonia. The establishment of Hemtex in additional European markets will also be considered, in which case mainly in cooperation with franchisees,” adds Anders Jansson.

Another important feature of the growth strategy entails the development of new store concepts. In February 2007, Hemtex decided to establish its first volume store, which has significantly larger retail space than existing stores. The store will be located on Sergelgatan in central Stockholm and will open in October. It will be followed by a further three to four stores in Sweden and Finland during the 2007/2008 fiscal year.