Quarterly profits jump at H&M

(Sharecast News) - Fashion giant H&M posted a spike in quarterly profits on Thursday despite sluggish sales growth, after it benefited from tighter control of costs and tariff refunds. The Swedish-owner of H&M, Cos and Arket, among others, saw net sales rise just 1% in local currencies in the three months to 31 August to SEK57.2bn (£4.4bn), while operating profits soared to SEK6bn from SEK4.9bn a year previously, comfortably ahead of forecasts. The operating margin expanded to 10.6% from 8.6%.

Net profit attributable to shareholders was SEK4.1bn.

The increase in profits was primarily attributed to tariff refunds alongside stricter control of costs and purchasing.

Daniel Erver, chief executive, said: "Our work - especially within purchasing, cost control and more efficient operations - has contributed to a more profitable business. Although sales developed in a positive direction during the quarter, we see further potential to increase sales going forward.

"Our summer collections were well received and contributed to a better sales development, particularly towards the end of the quarter. At the same time, sales were affected by, among other things, continued disruption in the logistics network in Europe and in the global supply chain."

The retailer currently expects sales in September to be up 1% in local currencies year-on-year.

Sales growth at H&M, the world's second-largest fashion retailer after Zara-owner Inditex, has been curtailed in recent years in the face of increasingly stiff competition. Inditex reported sales growth of 9% over the first half.

As at 1230 BST, the Stockholm-listed stock was down 1%.