© Reuters. Folks stroll previous H&M store in Riga, Latvia January 30, 2020. REUTERS/Ints Kalnins
By Marie Mannes
STOCKHOLM (Reuters) – Trend retailer H&M’s shares hit a 16-month excessive on Thursday after its second-quarter revenue beat estimates as cost-cutting measures began to bear fruit and its summer season assortment benefited from hotter climate in Europe.
H&M, which has lagged Zara proprietor Inditex (BME:), has sought to lift its trend attraction and enhance its higher-priced manufacturers, focusing on customers much less susceptible to the rising value of dwelling as fast-fashion big Shein takes market share with inexpensive garments.
Shares on the earth’s second-biggest trend retailer jumped 11% to hit their highest degree since February 2022. They had been final buying and selling at 174.7 Swedish crowns.
H&M elevated gross sales in lots of markets regardless of a squeeze on customers’ spending capacity and “unfavourable” climate, CEO Helena Helmersson mentioned, including that its summer season assortment had obtained off to begin as temperatures rose throughout northern Europe.
Gross sales from June 1-27 had been up 10% from a yr earlier, signal for the beginning of H&M’s third quarter. The H&M womenswear assortment, in addition to sturdy efficiency from the Cos and Arket manufacturers, drove the enhance in gross sales, Helmersson mentioned.
The stronger-than-expected revenue helped buyers digest a weaker margin of 8.2% for the second quarter, down from 9.2% a yr earlier.
H&M blamed excessive uncooked materials and freight prices for the decrease margin, however mentioned these components had “pivoted from being unfavorable to being constructive”, indicating easing inflationary stress.
“After all that comes with a chance to regulate costs,” Helmersson informed Reuters in an interview.
In China, the place H&M has been struggling, Helmersson caught to the identical message as earlier this yr, saying the corporate just isn’t but on the degree it desires to be, however issues are transferring in the suitable course.
DROP IN INVENTORY LEVEL SURPRISES
A pointy drop in stock ranges was a constructive shock, in keeping with Cedric Rossi, next-gen shopper analyst at Bryan Garnier in Paris.
“I used to be actually shocked to see that, with none larger promotional exercise – as a result of markdowns had been in step with final yr – H&M decreased its stock place,” Rossi mentioned.
H&M’s stock was at 16.7% of rolling 12-month gross sales on Could 31, down from 19.2% a yr earlier.
H&M final yr introduced layoffs and different value cuts that it mentioned would assist it cut back prices from the second half of 2023 onwards.
The associated fee chopping helped working revenue within the second quarter hit 4.74 billion Swedish crowns ($438.6 million), down from 4.98 billion a yr earlier however effectively above the 4.07 billion forecast by analysts in a Refinitiv ballot.
H&M, which closed a complete of 303 shops throughout its manufacturers within the yr to Could 31, mentioned its new retailer openings would primarily be in “development markets” whereas it will shut shops primarily in established markets.
($1 = 10.8084 Swedish crowns)
