© Reuters. People walk past an H&M store in Riga, Latvia January 30, 2020. REUTERS/Ents Kalinins
STOCKHOLM (Reuters) – H&M, the world’s second-largest fashion retailer, reported stronger-than-expected March-May earnings on Thursday and said third-quarter sales were also off to a good start as the company strives to catch up with faster-growing rivals. .
Operating profit in the Swedish group’s second quarter of the March-May fiscal year was 4.74 billion Swedish crowns ($438.55 million), down from 4.98 billion a year earlier but ahead of an average forecast of 4.07 billion in a Refinitiv poll of analysts.
H&M which defaulted owner Zara Inditex (BME:), has sought to increase its fashion appeal and boost its pricier Cos brand, targeting shoppers less vulnerable to the rising cost of living as fast-fashion giant Shein gains market share with cheap clothing.
“The summer collections were well received and the third quarter got off to a good start,” CEO Helena Helmerson said in a statement.
“Growth conditions and profitability continue to develop in a favorable direction,” she added.
Local currency sales from June 1 to June 27, the first month of H&M’s third quarter, were up 10% over the same period last year.
H&M’s operating profit margin in the second quarter was 8.2%, down from 9.2% a year ago, while the group reiterated its target of a 10% margin next year, which analysts said could be difficult to hit.
The group last year announced layoffs and other cost cuts that it said at the time would help it save costs from the second half of 2023 onwards.
H&M’s share price is up 27% in the past 12 months, trailing the 58% increase in Inditex shares.
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