Retailer H&M posts stronger than expected return to profit

The Swedish clothing retailer estimated pre-tax earnings reached about 2bn kronor (€194m) in the three months through August, based on preliminary results

The Swedish clothing retailer estimated pre-tax earnings reached about 2 billion kronor (€194m) in the three months through August, based on preliminary results.

H&M has reported a return to profit that surged far past analysts’ expectations, a bullish sign for purveyors of fast fashion.

The Swedish clothing retailer estimated pre-tax earnings reached about 2 billion kronor (€194m) in the three months through August, based on preliminary results.

That is eight times the average analyst estimate and almost double the highest forecast. Its shares rose as much as 13%.

Low-price fashion retailers such as Primark have been gaining market share as consumers return to shops in search of casual wear for working from home. 

H&M attributed the earnings to well-received collections and fewer markdowns than it expected. 

The report soothed concern about H&M’s perennial issue with a buildup of inventory.

“The level of price reductions is still a bit higher than last year, but substantially lower than what we guided for when we entered the third quarter,” Nils Vinge, director of investor relations, said.

Sales fell 16% in local currencies, moderating from a 50% drop in the second quarter. H&M began the period with 900 of 5,000 stores temporarily closed, and by the end of August, all but 200 were open. That number is now down to 142, Mr Vinge said.

H&M will report full earnings on October 1, when investors will get more details on whether it managed to sell more of its unsold inventory.

Bloomberg