H&M boosts profit on strong summer collection

Pretax profit rose 25% at the fast-fashion retailer in the three months through August

H&M managed to boost sales in the key US market by 19%  as it slashed prices. Photograph: Demetrius Freeman/Bloomberg

H&M managed to boost sales in the key US market by 19% as it slashed prices. Photograph: Demetrius Freeman/Bloomberg

 

H&M’s quarterly earnings rose for the first time in more than two years as a well received summer collection helped the Swedish retailer boost profitability.

Inventory declined in constant-currency terms, and the company was able to reduce discounting as sales rose for a sixth consecutive quarter. H&M trimmed its store-opening plan for this year, and said revenue growth kept its pace.

“The new season has got off to a promising start,” chief executive Karl-Johan Persson said in a statement on Thursday.

Fast fashion has been a cut-throat market lately, with US chain Forever 21 filing for bankruptcy earlier this week. H&M managed to boost sales in the key US market by 19 per cent as it slashed prices to as low as $5.99 (€5.45) for skinny jeans and $17.99 for a dress with a belt.

H&M shares rose as much as 2.4 per cent on Thursday morning trading in Stockholm, bringing its gain this year to 50 per cent.

H&M’s stock can be volatile because short sellers have bet against about a sixth of the company’s freely traded shares, according to IHS Markit data.

Store openings

The retailer reduced its store-opening plan for the second time this year to 120 net additions. Inventory stood at 42 billion kronor (€3.8bn) at the end of August.

Some of the company’s sales growth is coming from a weaker krona, which boosts revenue from abroad when translated into the Swedish currency. However, the foreign-exchange move also makes it more expensive to source goods from Asia.

Pretax profit rose 25 per cent to 5.01 billion kronor in the three months through August, which is the company’s fiscal third quarter. Analysts expected 4.89 billion kronor. – Bloomberg