H&M profits beat analysts’ estimates as shoppers snapped up its low-cost clothing to replenish post-COVID wardrobes. Hennes & Mauritz AB reported second-quarter earnings Wednesday.
H&M profits rose a third, pretax, to 4.78 billion kronor ($470 million) in the three months through May, the company said Wednesday. Analysts had expected 3.98 billion kronor. H&M also announced plans to begin a 3 billion-kronor share buyback.
“Well-received collections have led to strong development, with a further increase in full-price sales and decrease in markdowns,” CEO Helena Helmersson said in a statement.
H&M and rival brick-and-mortar retailers have seen a rebound in sales. Consumers have been refreshing wardrobes for work and special events after two years spent mostly stuck at home. Still, rising prices for energy, transport and food are stretching shoppers’ budgets and sapping confidence.
While soaring costs are squeezing profitability for some retailers, H&M’s gross margin expanded to 54.8% in the second quarter. That topped estimates and reassured analysts, including James Grzinic at Jefferies. Warnings from observers that H&M profits would see a hit had contributed to a 28% drop in the share price this year.
H&M ranks No. 11 in Digital Commerce 360’s Europe Database.
What Bloomberg Intelligence says
The company is restoring its fashion credentials with consumers. The Swedish retailer is also benefiting from the return to in-store shopping at the expense of online. Comparisons for revenue ease in July and August, with the potential for sales to recover from the 6% drop in June.
The company still faces challenges from the war in Ukraine and sporadic lockdowns in parts of China, where H&M has been the subject of a boycott related to its refusal to use cotton from the Xinjiang region. H&M is closing a flagship store in Shanghai, while in Russia it halted sales following the invasion.
Net sales in June are expected to show a decrease of 6% in local currencies from the same month last year. H&M profits will be hurt by the sales pause in Russia, Belarus and Ukraine, H&M said.
H&M said it’s looking at ways to “prioritize initiatives, redistribute resources and ensure continued good profitability.”
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