H&M cheers markets after third-quarter earnings surge

(Sharecast News) - Shares in Swedish fashion giant H&M took off on Thursday, after third-quarter numbers comfortably beat expectations. Sales at H&M - which also owns Cos, & Other Stories and Weekday, among other brands 0 came in at 57.0bn Swedish krona (£4.5bn) in the three months to 31 August, up 2% in local currencies.

Analysts had been expecting sales closer to SEK56.8bn.

Operating profits, meanwhile, surged 40% to SEK4.91bn, comfortably ahead of forecasts for SEK3.68bn. It also reversed two consecutive quarters of falling earnings at H&M.

The retailer said earnings had benefited from a "stronger" customer offering, an improved gross margin and stringent cost control, including shutting under-performing stores.

The chain had around 4% fewer stores year-on-year by the end of the quarter.

As at 0930 BST, the stock was up 10%.

Daniel Erver, chief executive, said: "We are taking steps in the right direction.

"In an environment of ongoing uncertainty with cautious consumers, all of us within the H&M group are consistently focusing on our customer offering, always giving the best value for money."

Looking to the current quarter, H&M said the autumn collections had been well received, although it noted sales in September were likely to be flat year-on-year.

Russ Mould, investment director at AJ Bell, said: "H&M is on the comeback trail. It is making progress in a difficult retail environment, fighting off competition and upping its game with designs that encourage shoppers to keep coming back for more.

"It has enjoyed stronger margins, inventory is being run down and there has been a good reception to its autumn range."

"Unfortunately, there are still negative issues to overcome. Tariffs are set to impact margins in the current quarter, and it is still having to offer discounts to keep the tills ringing."