H&M reports jump in profit

Bloomberg

Hennes & Mauritz AB (H&M) reported second-quarter earnings that beat analysts’ estimates as shoppers snapped up its low-cost clothing to replenish post-Covid-19 wardrobes. The shares rise as much as 6.5% in Stockholm.
Pretax profit at the Swedish retailer rises by a third to 4.78 billion kronor in the three months through May, the company said on Wednesday. Analysts had expected 3.98 billion kronor. H&M also announced plans to begin a 3 billion-kronor share buyback.
“Well-received collections have led to strong development, with a further increase in full-price sales and decrease in markdowns,” Chief Executive Officer Helena Helmersson said in a statement.
H&M and rival brick-and-mortar retailers have seen a rebound in sales as consumers refresh wardrobes for work and special events after two years spent mostly stuck at home. Still, rising prices for everything from energy to transport and food are stretching shoppers’ budgets and sapping confidence.
While soaring costs are squeezing profitability for some retailers, H&M’s gross margin expanded to 54.8% in the second quarter, topping estimates and reassuring analysts including James Grzinic at Jefferies. Warnings from observers that H&M will see a hit to profitability had contributed to a 28% drop in the share price this year.
The company still faces challenges from the war in Ukraine and sporadic lockdowns in parts of China, where H&M has been the subject of a boycott related to its refusal to use cotton from the Xinjiang region. H&M is closing a flagship store in Shanghai, while in Russia
it halted sales following the
invasion.
Net sales in June are expected to show a decrease of 6% in local currencies from the same month last year, hurt by the sales pause in Russia, Belarus and Ukraine, H&M said.
H&M said it’s looking at ways to “prioritise initiatives, redistribute resources and ensure continued good profitability.”