PARIS — A boycott in China and supply chain disruption continue to weigh on H&M Group, which reported a significant leap in profits for the third quarter on Thursday.
The Swedish fast-fashion retailer saw its profit after financial items leap 158 percent year-over-year, to 6.09 billion Swedish kronor, or $694.8 million at current exchange, in the three months to Aug. 31.
“The H&M Group’s increase in profit for the quarter is mainly a result of well-received collections with more full-price sales, lower markdowns and good cost control,” said chief executive officer Helena Helmersson. “With our continued transformation and our well-positioned customer offering we are optimistic that we will see long-term, profitable and sustainable growth.”
The profitability numbers come two weeks after H&M disappointed the market when its released its third-quarter sales, as reported.
While its revenues for the three-month period grew significantly in the Americas and returned to pre-pandemic levels in Europe, Asia weighed heavily on its overall numbers.
H&M’s sales in China have plummeted in recent months as consumers boycotted the brand due to its stance on Xinjiang cotton. While the retailer declined to comment on the situation during a call with analysts and investors Thursday, China dropped out of its top-10 markets in the third quarter.
In the same period a year ago, it was the company’s fifth market in terms of sales. “When it comes to China, we are still in a complex situation,” was all Helmersson would say on the subject during the call.
On Thursday, H&M’s share fell 3.43 percent to close at 178.36 Swedish kronor, or $20.35.
For the first nine months of the fiscal year, the group’s net profit was 8.3 billion Swedish kronor, or $946.9 million, compared with a loss of 1.61 billion Swedish kronor, or $183.7 million, in the prior-year period.
Net sales stood at 142.15 billion Swedish kronor, or $16.22 billion, an increase of 5.7 percent year-over-year.
For the current quarter, the company said its new fall collections had been well received by consumers, and that sales in September were slightly up in local currencies. Nevertheless, “demand was not able to be fully met because of disruption and delays in product flow,” said H&M, which also operates banners including Cos and Arket.
The company expects that disruption to be ongoing for the rest of the year. “There are some slight imbalances in the supply chain,” chief financial officer Adam Karlsson told analysts and investors during a conference call Thursday. “We account for that and have a little bit of a conservative outlook on the fourth quarter.”