H&M Q2 Profit Beats Forecast Despite EU Debt Woes

Stockholm—The demand for fast fashion evidently remains high even in the debt-ridden nations of Southern Europe.

At least that’s the indication today in H&M’s second quarter earnings report where the apparel and accessories giant posted nearly a 23% gain in profit and resilient sales despite economic uncertainty.

H&M said pretax income reached 7.1 billion kronor (about $1 billion) in its second quarter, compared with 5.8 billion a year-ago. That was ahead of analysts’ average forecast for a 6.6 billion. Earnings per share grew to 3.15 kronor from 2.57 kronor.

Sales including VAT advanced to 36.95 billion kronor from 32.4 billion kronor a year ago. The company reported 12% growth in local currencies and a 2% in comparable store sales.

“The year started well and the positive trend continued in the second quarter,” said Karl-Johan Persson, ceo. “The spring collections have been well received by our customers as shown by our increased market share in a fashion retail market that continues to be challenging.”

Gaining Share Even in ‘Challenging Markets’

H&M appears to have benefitted, too, from its policy of holding prices rather than passing on higher costs, such as cotton prices, to its consumers. The company noted that besides helping it gain market share, it has meet profit margins, too. In fact, the impact of cotton prices were almost “neutralized” as the company reported unchanged gross margin of 61.7%.

“Many countries are still in a challenging macro-economic situation with austerity measures and restrained consumption,” H&M said. “The fact that H&M continues to gain market share even in these challenging markets is a clear sign that H&M’s strong offering is appreciated by customers worldwide.”

H&M reported a 20% increase in sales in the United Kingdom, and a 40% increase in the United Sates. Even amid debit crises in countries such as Greece and Spain, H&M reported higher sales.

For the second half of its year, H&M plans to launch e-commerce in the United States. Expansion continues with the opening of 275 stores by the end of this year as well as entering new markets in Bulgaria, Mexico, Latvia, Malaysia and Thailand.

In addition, H&M will open two pop-up shops dedicated to sportswear to coincide with the London Olympics. The first one will be based in Covent Garden and will open on July 6 for 10 weeks and the second in Westfield Stratford, next to the Olympic Park, which is set to open on July 7 and will remain in business on a permanent basis if it is successful.

“It’s a nice surprise for our customers and a new twist on the H&M business concept of fashion and quality at the best price,” said Magnus Olsson, H&M’s UK & Ireland country manager.

 

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