X-SPEED-KNOCK: H&M reported better-than-expected March-May profit on Thursday and said sales in the third quarter were off to a good start as the company struggled to catch up with growing rivals. faster.
Second largest stock in the world fashion retailer rose 7% in early trading following the results.
H&M, has fallen behind zara owner Inditex, has sought to enhance its fashion appeal and promote the higher-priced Cos brand, targeting shoppers less affected by rising costs of living as the giant Fast fashion Shein takes market share with cheaper clothes.
H&M has increased sales in many markets despite limited consumer spending and “unfavorable” weather, Chief Executive Officer Helena Helmerson said, adding that the collection H&M’s summer episode got off to a good start as temperatures rose across northern Europe.
Inditex and others also reported good sales thanks to well-received summer collections and hot weather.
“The conditions for growth as well as profitability continue to develop in a favorable direction,” the CEO added.
H&M’s operating profit margin for the second quarter was 8.2%, down from 9.2% a year earlier, while the group reiterated its target of a 10% margin next year, which Analysts say it’s hard to achieve.
Profit margin was supported by lower input costs thanks to improved macroeconomic conditions as well as the positive impact of the cost-cutting program.
Last year, the group announced staff layoffs and other cost cuts that it said at the time would help it save costs from the second half of 2023 onward.
“External factors affecting our purchasing costs continue to improve, the cost and efficiency program is underway at full speed, and the bulk of the work,” said the CEO. that we have been working on in recent years is beginning to bear fruit.”
The Swedish group’s second-quarter operating profit for the March-May quarter was 4.74 billion Swedish crowns ($438.55 million), down from 4.98 billion a year earlier but higher than the 4.07 billion was forecast by analysts in a Refinitiv Eikon poll.
Local currency sales from June 1 to 27 to start H&M’s third quarter were up 10% from a year earlier.
H&M’s share price is up 27% over the past 12 months, well below Inditex’s 58% gain.