PARIS — Adding to evidence of markedly improved trading for fast-fashion’s giants, Hennes & Mauritz AB reported expectation-beating profit over the third quarter while flagging a 5 percent decline in sales in September — another figure that outpaced forecasts.
“Although the challenges are far from over, we believe that the worst is behind us and we are well placed to come out of the crisis stronger,” said Helena Helmersson, chief executive officer of H&M Group, which operates Cos, Monki and Weekday in addition to H&M.
Operating profit for the three months ended Aug. 31 came to 2.7 billion Swedish kronor, or $300 million, while sales came to 50.87 billion Swedish kronor, a 16 percent decline in local currencies. The gross margin came to 48.9 percent.
“More good news for Q3,” said Richard Chamberlain of RBC Europe, citing stronger than expected gross margin along with September sales rate, down 5 percent — an improvement over recent months. The analyst predicted it would be a “positive read” for the sector, including Inditex. Profit after financial items came to 2.37 billion Swedish kronor, outpacing Chamberlain’s forecast of 2.1 billion Swedish kronor. The retailer in August had said it expected profit of 2 billion Swedish kronor.
Analysts have singled out stronger full-price sales — a crucial issue for H&M, which had suffered from discounting spirals in recent years. The retailer has been bulking up digital services and refocusing its offer. The coronavirus crisis hit just as the group had started to see turnaround efforts pay off.
H&M has adapted to the coronavirus crisis, and temporary store closures, by cutting costs and renegotiating leases for its sprawling network of stores.
The financial industry has been surprised by fast-fashion’s recovery in recent weeks, but warn the sector is not entirely out of the woods, and investors expect a moderate pace of recovery.
H&M reported a loss in the first half as the coronavirus crisis weighed heavily on sales, and has doubled down on efforts to improve digital channels — which has seen a significant increase in business during lockdown periods, while speeding up store closures. The group plans a net decrease of around 250 stores in 2021.