H&M shares jump 17% as summer collection boosts profit
Fashion retailer H&M’s shares rose 17% following the release of their second-quarter profit, which exceeded expectations.
The company attributed the increase to cost-cutting measures and favorable weather conditions that benefited its summer collection. The stock reached its highest level since January 2022.
H&M reported a 9% increase in net sales in the first half of the year, reaching SEK 112,488 million. However, in local currencies, net sales only increased by 1%. The gross profit margin decreased to 50.0% from 52.2% in the previous year.
Operating profit amounted to SEK 5,466 million, with an operating margin of 4.9%. The company cited factors such as high raw material and freight costs, a strong US dollar, increased energy costs, and the winding down of operations in Russia as negatively impacting their results. The result after tax was SEK 3,828 million, or SEK 2.35 per share.
In the second quarter, net sales increased by 6% to SEK 57,616 million, while the gross profit margin decreased to 52.7% compared to 54.8% in the previous year. Operating profit was SEK 4,741 million, with an operating margin of 8.2%. The company mentioned that high raw material and freight costs, as well as a strong US dollar, had a negative impact on the results.
Despite these challenges, H&M reported a 17% increase in sales for its Portfolio Brands during the second quarter. Additionally, sales for the H&M group from June 1 to June 27, 2023, increased by 10% in local currencies compared to the same period in the previous year.
H&M plans to initiate a share buyback program of up to SEK 3 billion in the period leading up to the 2024 annual general meeting.
CEO Helena Helmersson expressed optimism about the company’s growth and profitability prospects. She highlighted the positive development of external factors affecting purchasing costs, ongoing cost and efficiency programs, and customer-focused initiatives.
Despite challenges in China, H&M stated that it is moving in the right direction to improve its performance in that market.
A notable surprise was the significant decrease in inventory levels, which positively impacted the company’s financials. H&M’s inventory dropped to 16.7% of rolling 12-month sales, down from 19.2% in the previous year.
H&M’s cost-cutting measures contributed to second-quarter operating profit exceeding analyst forecasts. The company aims to open new stores in growth markets while closing stores in established markets.
