H&M, the world's second-biggest fashion retailer, reported on Thursday its first quarterly rise in pretax profit in over two years and said efforts to meet rapid changes in its industry were on track. H&M has been spending heavily on reviving its business in the face of years of falling profits and growing inventories due to slowing sales at its core brand's stores amid tougher competition and changing shopping habits.
Its shares have spiked 46 percent this year, and 58 percent from the 13-year low seen in 2018, on hopes it is getting back on track. But they are still at just half of their 2015 record level. Pretax profit in the June through August period beat expectations, growing to 5.0 billion crowns ($507 million) from a year-ago 4.01 billion. Analysts had on average forecast a rise to 4.93 billion crowns, according to Refinitiv data.
The increase was the Swedish group's first since the second quarter of 2017. Profit growth was helped by accelerating sales growth on the back of strong demand for summer collections and market share gains. "The continued development of more full-price sales and reduced markdowns contributed to a 26 percent increase in operating profit in the third quarter, all while maintaining a high level of activity in our transformation work," CEO Karl-Johan Persson said in a statement.
The operating profit margin rose to 8.0 percent from 7.1 percent. Inventories increased 9 percent to 42.0 billion crowns at the end of the third quarter, equivalent to 18.5 percent of sales. However, H&M said that measured in local currencies, they shrank by 1 percent while the composition of the stock had kept improving.