H&M beat analysts’ forecasts with healthy sales growth as clothing retailer boosted by easing trade restrictions
H&M posted a better-than-expected performance for the second quarter after benefiting from an easing of in-store trade restrictions.
The company’s net sales increased 17% year-on-year, or 12% in local currencies, to 54.5 billion Swedish kronor (£4.36 billion) between March 1 and the end of May .
That was still lower than pre-pandemic volumes, but analysts polled by data provider Refinitiv had predicted total revenue of £4.32 billion.
The Stockholm-based company, which is the world’s second largest clothing retailer, is due to release its full results for the period in a fortnight as part of its interim report as it is expected to reveal a strong rebound in trade.
For much of the past two years, the group’s outlets have been forced to temporarily close or subject to limits on opening hours and the number of customers by government rules put in place to stem the spread of Covid. -19.
Apparel businesses were heavily damaged early in the pandemic as store closures, combined with event cancellations, and the work-from-home trend led consumers to save more money or spend it on clothes. alternatives.
Shoppers eventually returned to stores as vaccination programs were successfully rolled out, although the recovery at H&M was overtaken by its main rival Inditex.
Last week, Zara and owner Massimo Dutti revealed that first-quarter revenue jumped 800 million euros from pre-pandemic levels, while profits were up 80% from last week. previous year to reach £646 million.
Video: Yen down almost 15% this year (Bloomberg)
Click to enlarge
The business was supported by the popularity of its spring and summer collections, sales growth in all territories, particularly the United States, and a slight decline in online orders.
But the retailer also benefited from a price increase higher than that of its competitors at a level sufficient not to cause a slowdown in trade and to push its gross margin to its highest level in a decade.
Zara has raised starting prices for goods by at least 10% year-on-year every month since January, including 18.5% in April, according to a recent study by Swiss bank UBS.
By comparison, European clothing brands like H&M and German digital retailer Zalando only increased their average retail prices by 4.2% in April.
The previous month, H&M had identified growth in deliveries and disruptions in raw materials as factors behind the price increase, while costs were further impacted by investments in technology development.
There are additional fears that soaring inflation rates, which are at multi-decade highs in the UK, US and eurozone, could lead consumers to cut back on their disposable spending.
Harry Barnick, senior analyst at research firm Third Bridge, said: “In the current inflationary environment, H&M can push prices up within certain ranges.” That being said, the price increase in the core fashion ranges will be a challenge.
On the other hand, he added, H&M could steer customers away from more expensive brands like Zara as well as smaller brands struggling to cope with cost pressures.
Investors reacted negatively to the company’s announcement, causing H&M shares to fall 6.5% on the Nasdaq Nordic Exchange on Wednesday, meaning their value has fallen 39% over the past year.