Hennes & Mauritz AB (H&M), the world’s second-biggest fashion retailer, yesterday reported a surprise operating profit for the period from December last year to February, despite weak demand as consumers curtailed spending amid soaring inflation.
Operating profit in the Swedish group’s fiscal first quarter was 725 million Swedish kronor (US$69.73 million) against a profit of 458 million kronor a year earlier and a mean forecast of a 1.10 billion kronor loss in a Refinitiv poll of analysts.
The company said consolidating the earnings of its Sellpy second-hand platform — which operates in Sweden, Germany and Austria — had boosted earnings by about 1 billion kronor, but added that H&M’s overall sales for the spring season had been delayed in many markets by cold weather.
While H&M showed signs of bringing its costs under control, it still struggled to compete with major rival Inditex SA, owner of Zara and other brands, as well as rapidly expanding fast-fashion online retailers such as Shein and Temu.
“The external factors that influence purchasing costs continue to improve, work on the cost and efficiency program is proceeding at full speed, and many of the changes that we have made in recent years are starting to have an effect,” H&M chief executive Helena Helmersson said in a statement.
H&M’s first-quarter revenue, published separately on March 14, was worse than feared, as the small increase in sales missed most estimates, analysts said at the time.
As Inditex lured customers back to in-person shopping after the COVID-19 pandemic, H&M’s more cost-conscious base has been reluctant as inflation eats into purchasing power, while Shein and Temu won success online with cut-price items such as US$10 dresses.
H&M’s US$4 billion inventory buildup has been one of Helmersson’s largest headaches, leading the company to rely on heavy discounting in past years.
The company’s price cuts were flat in the first quarter, which led to a higher-than-expected gross margin, analysts said.
H&M said net sales for this month were expected to increase by 4 percent in local currencies compared with the corresponding period last year.
“The spring collections have been well received where the weather has warmed up,” the company said.
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