H&M profits drop but sales expected to bounce back in June
Fashion firm H&M has revealed a better-than-feared drop in profits and said it expects a sales rebound in June despite heavy discounting in the sector.
The Swedish group – the world's second largest stock market-listed fashion firm – posted a 17% fall in operating profits to 5.91 billion Swedish krona (£455 million) for the second quarter to May 31.
But it beat expectations, helping H&M's shares jump 7% in Stockholm on Thursday morning trading.
This came despite a slightly worse-than-forecast performance for sales, which edged just 1% higher in the quarter due to store closures.
H&M said with the store closures stripped out, sales rose by 3%.
The firm gave an upbeat outlook for June, guiding for a 3% jump in sales, which marks a significant rise on the 6% fall seen a year ago.
But it also flagged more discounting in the third quarter compared with a year earlier.
H&M said earnings were impacted by higher costs of clothing due to a stronger dollar, as well as investment into its 'customer offering' and giving 'customers even more value for money'.
Chief executive Daniel Erver said: 'Our plan, with its focus on the product offering, the shopping experience and the H&M brand, is confirmed by the progress we see in key parts of the business.'
He added: 'In uncertain times with cautious consumers we monitor macroeconomic and geopolitical developments closely and continuously adapt both the customer offering and the business to meet our customers' needs in the best way.'
The group said it was keeping a close eye on 'developments in global trade and trade restrictions'.
'With good flexibility in the supply chain and through the pricing of the customer offering there are opportunities to adapt the business to changed conditions,' it said.
H&M closed 153 stores in the year to May 31, leaving it with 4,166 worldwide.
In the first six months overall, it said operating profits fell 22% to 7.1 billion Swedish krona (£547 million) as net sales lifted by 1%.
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