H&M sales beat estimates as it boosted discounts

Bloomberg

Hennes & Mauritz AB shares rose the most in 16 years after the ailing Swedish fashion retailer reported sales growth that took analysts
by surprise, boosting optimism
the H&M chain may have turned the corner.
The stock surged as much as 11 percent on Monday, adding $2 billion to the market value of the Stockholm-based retailer. H&M reported third-quarter revenue growth that exceeded the highest analyst estimate as it offered discounts to clear out inventory and received a boost from the weak krona.
The gain is the first glimmer of a turnaround at H&M, which has been struggling to reduce a record position of unsold garments. About a quarter of the company’s freely traded shares are shorted, according to Markit Securities data.
That makes the stock prone to short squeezes, when a bit of good news gets short sellers scrambling to buy the stock back to close their
positions.
Separately, the UK’s Mail said Chairman Stefan Persson has talked with banks including Goldman Sachs and JPMorgan about a debt package to take the firm private, citing unidentified people close to the situation. Persson has repeatedly denied he’s planning a buyout after he made share purchases over the past year that sparked such speculation.
A spokeswoman for H&M declined to comment on the report.
“H&M seems to have come close to stabilising same-store sales,” wrote Charles Allen, an analyst at Bloomberg Intelligence. “If they have managed to reduce inventory, weak margins are likely to be forgiven.”
Last week, Zara owner Inditex SA reported its weakest six-month sales growth in four years. An unusually warm summer likely had shoppers staying away from stores and opting for lower-priced garments such as tank tops and shorts.