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H&M beats analysts' expectations with quarterly profits growth

Lauretta Roberts
03 October 2019

H&M has posted quarterly profits growth for the first time in more than two years as shoppers responded positively to its SS19 collections.

The Swedish fashion giant saw net sales increase by 12% to SEK 62,572 m (£5.06 billion) in the third quarter, with like-for-like sales up 9%. Pre-tax profit jumped from SEK4.01 billion (£32 million) to SEK5.01 billion (£41 million). Meanwhile online sales were up 30%.

H&M CEO Karl-Johan Persson said of the results: “Well-received summer collections and increased market share show that we are on the right track with our transformation work to meet customers’ ever-increasing expectations. Continued increases in full-price sales and decreases in markdowns contributed to a 26% increase in operating profit in the third quarter, all while maintaining a high level of activity in our transformation work."

The company said it was continuing at pace with the integration of its online and physical stores while it was optimising its store portfolio through increased consolidation in established markets and continuing its expansion in growth markets. As a result fewer new stores (around 120) will be opened during full-year 2019 than had been previously communicated.

Analysts responded positively to the better-than-expected numbers. "The impressive figures come after the world’s second-largest retailer’s summer collection was well received and provide optimism that the current transformation plan is reaping reward.

"These are exactly the figures that investors want to see. They provide solid evidence that H&M’s transformation is on track after experiencing years of falling profits. With changing consumer habits and tougher competition, it’s a challenging climate to be trading in. Yet H& M are showing all the right signs that they are on the path to recovery.

"Investors have remained cautious on the stock whilst they await signals that the recovery is on track, these results do just that. The share price is still significantly off its 2015 peak, however, they are up over 30% year to date as investor confidence rebounds," said Steve Miley, a senior market analyst at www.asktraders.com.

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