H&M, the world’s second-biggest fashion retailer, reported on Thursday a surprise operating profit for the December-February period, despite weak demand as consumers curtailed spending amid soaring inflation.
Operating profit in the Swedish group’s fiscal first quarter was $69.73 million against a profit of 458 million a year earlier and a mean forecast of 1.10 billion loss in a Refinitiv poll of analysts.
The company said consolidating the earnings of its Sellpy second-hand platform had boosted earnings by about 1 billion crowns, but warned 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, 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 programme is proceeding at full speed, and many of the changes that we have made in recent years are starting to have an effect,” 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 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 $10 dresses.
H&M said net sales for March were expected to increase by 4 per cent 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.
H&M’s share price has risen 9.5 per cent so far in 2023, less than half the 19.7 per cent gain of Inditex. The Swedish group’s stock closed at 122.86 crowns in Stockholm on Wednesday, just one third of its 2015 all-time high of 368.5 crowns.
- Reporting by Marie Mannes. Editing by Terje Solsvik and Gerry Doyle, of Reuters.