Fashion retailer H&M earned less in the second quarter. The company announced on Thursday in Stockholm that high raw material and freight costs and the strong US dollar had weighed on the result. However, the results were better than expected. CEO Helena Helmersson also sees light on the horizon and an increasing relaxation on the cost side. The news caused a jump in prices on the financial market.
The stock rose significantly in a subdued overall market in the morning. Most recently, the value gained around eleven percent. Other titles in the industry such as Inditex also benefited. With the course gains, H&M continued its high soaring since the beginning of the year. With a rise of around 40 percent, the share has performed almost twice as strongly as the retail sector.
Jefferies analyst James Grzinic highlighted the major advances in operating costs. In June, the fashion chain’s business also developed positively. The analysts from RBC also referred to the cost development. Goldman Sachs analyst Richard Edwards expects consensus estimates for pretax profit to rise 4 percent this year.
The external factors that drove up purchasing costs continued to improve, explained boss Helmersson. In addition, the efficiency and savings program is running at full speed. H&M has managed to increase sales in many markets despite the declining purchasing power of consumers, said the manager. After bad weather in the second quarter, the summer collections are now well received and the third quarter has started well. According to Helmersson, the environment for accelerating growth and increasing profitability is continuing to develop in a favorable direction.
In the second business quarter (at the end of May), after a good start to the year, operating profit fell to around 4.7 billion Swedish crowns after almost 5 billion crowns a year earlier. However, this was more than what analysts had expected on average. After tax, profit fell from 3.7 to around 3.3 billion crowns.
H&M had already presented sales figures in mid-June. Bad weather slowed growth. Revenues increased by six percent to 57.6 billion crowns (around 4.9 billion euros), in national currencies sales even stagnated at the previous year’s level.
For the coming financial year, the company is therefore still assuming an operating margin of 10 percent. In the second fiscal quarter, it was 8.2 percent, which corresponds to a decrease of one percentage point compared to the previous year.
H&M has a robust financial position, stable cash inflows and balanced inventories, Helmersson said. The long-term goals remained in effect. (dpa)