© Reuters. FILE PHOTO: The H&M clothes retailer is seen in Instances Sq. in Manhattan, New York, U.S., November 15, 2019. REUTERS/Mike Segar
By Marie Mannes and Helen Reid
STOCKHOLM (Reuters) – Shares in H&M jumped 15% to a 10-month excessive after the style retailer reported a shock working revenue for its first quarter because of a one-off achieve and as cost-cutting measures began to bear fruit regardless of customers curbing spending.
Whereas H&M confirmed indicators of bringing its prices underneath management, it nonetheless struggled to compete with main rival Inditex (BME:), proprietor of Zara and different manufacturers, in addition to quickly increasing quick style on-line retailers equivalent to SHEIN and Temu.
“The worth for cash that we offer is basically, actually vital for patrons proper now,” CEO Helena Helmersson informed Reuters in an interview.
Unusually chilly climate in lots of the Swedish retailer’s key markets held consumers again from shopping for spring clothes, the corporate mentioned, denting its March gross sales figures.
Nonetheless, H&M shares hit their highest stage since Might final 12 months – a transfer merchants mentioned was amplified by quick positions on the inventory.
Working revenue within the firm’s fiscal first quarter was 725 million Swedish crowns ($69.73 million) towards 458 million crowns a 12 months earlier. That was largely due to a one-off 1.1 billion crown earnings increase from a re-valuation of its majority stake in second-hand resale platform Sellpy.
H&M mentioned Sellpy, during which it nonetheless holds a 79.84% stake, is now a part of the group.
“Now at a time when customers actually ask for an increasing number of second-hand, we got here to some extent the place it made sense to try this consolidation. We additionally see fairly some synergies,” Helmersson mentioned, including that H&M doesn’t plan to totally purchase Sellpy.
H&M’s working revenue margin was 1.3%, up from 0.9% a 12 months earlier. Helmersson mentioned the corporate was making progress in the direction of its purpose of a ten% working margin subsequent 12 months, a goal analysts at Credit score Suisse mentioned can be “very difficult” to achieve.
CHINA STILL COMPLEX
China remained a troublesome marketplace for H&M, which was hit by boycotts in 2021 and kicked off Alibaba (NYSE:)’s Tmall e-commerce web site after saying it could not supply cotton from the Xinjiang area over issues about human rights abuses.
“Clients can entry us on TMall once more, however general we’re nonetheless in a posh scenario, we’re in dialogue with completely different stakeholders,” Helmersson mentioned, including issues have been going “step-by-step in the best route”.
Web gross sales for March are anticipated to extend by 4% in native currencies in contrast with the identical interval final 12 months, H&M mentioned. That is a slight acceleration after gross sales for the primary quarter have been up 3% from final 12 months, however lags the competitors.
“Efficiency was weighed by climate and will, subsequently, be recovered as hotter temperatures land, however after all this result’s in stark distinction to the present buying and selling reported by Inditex,” JPMorgan (NYSE:) analyst Georgina Johanan mentioned.
The top of 2023 appears to be like extra promising for H&M’s earnings, when financial savings from its cost-cutting programme that’s slashing 1,500 jobs are anticipated to kick in.
($1 = 10.3975 Swedish crowns)
(Graphic: H&M shares lag rivals – https://fingfx.thomsonreuters.com/gfx/mkt/zdpxdqelgpx/hennes.PNG)
