H&M profit jumps as shoppers hit stores after pandemic

[June 29, 2022]  By Supantha Mukherjee

STOCKHOLM (Reuters) -H&M, the world's second-biggest fashion retailer, reported a forecast-beating 33% increase in March-May profit on Wednesday as shoppers flocked to its stores in the aftermath of the pandemic.

The Swedish company reported a pretax profit of 4.78 billion crowns ($471 million) for its fiscal second quarter, up from 3.59 billion a year earlier. Analysts polled by Refinitiv had on average forecast a 3.87 billion crown profit.

"Sales in physical stores increased substantially while online continues to do well," Chief Executive Officer Helena Helmersson said in a statement.

The company also said it had decided to use an authorisation given by owners at its annual general meeting in May to buy back 3 billion crowns worth of shares.

H&M shares were up 2.7% at 0720 GMT.

The fashion retailer had said earlier this month that sales in the quarter were up 12% measured in local currencies at 54.5 billion crowns.

It said on Wednesday, however, that local-currency sales in June, the first month of its third quarter, fell 6%, mostly because it halted its business in Russia, Ukraine and Belarus.

RBC analyst Richard Chamberlain said in a note to clients the June sales were lower than expected.

The company temporarily closed its stores in Russia in March after Russia's invasion of Ukraine. The country was H&M's sixth-biggest market with 4% of sales in the fourth quarter of 2021.

The H&M clothing store is seen in Times Square in Manhattan, New York, U.S., November 15, 2019. REUTERS/Mike Segar

In China, H&M has seen sales slump over the past year amid a consumer boycott over company remarks about the Xinjiang region. Consumer demand in general has also slumped due to COVID-19 lockdowns.

H&M's biggest rival, Inditex, the owner of Zara, reported an 80% jump in profit earlier this month in its fiscal first quarter on the back of soaring sales.

High raw material and transport costs have been a hurdle for fashion retailers and companies have been passing them on to consumers by raising prices.

"Disruption and delays still exist in the supply chain, but are gradually being eased," Helmersson said.

Despite increased costs, an increase in full-price sales and decrease in markdowns helped H&M to boost its operating margin to 9.2% from 8.3%.

($1 = 10.1538 Swedish crowns)

(Reporting by Supantha Mukherjee and Anna Ringstrom in Stockholm; Editing by Stine Jacobsen, Louise Heavens and David Clarke)

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