H&M Q3 Profit Jumps 22%, Beating Estimates

H&MStockholm—Helped by a promising launch of its U.S. online store, improved margins and cost controls, H&M reported today that its third quarter profit was up 22%, beating estimates.

For the quarter ended August 31, H&M posted a profit of 4.43 billion kronor (about $690 million), compared with a profit of 3.6 billion kronor the year before. That’s ahead of the 4.15 billion-kronor average estimate from analysts.

Net revenue rose 11% to 32 billion kronor with “like-for-like sales” up 2%.

U.S. Online Launch Successful

“Our well-received summer collections have resulted in strong sales development in the quarter, particularly in Asia but also in a number of European markets,” said CEO Karl-Johan Persson. “We have also seen the very successful launch of our online store in the U.S. in August and can see that our offering stands up well in the world’s largest online market.”

Shares of H&M rose in trading as much as 8%–the most since January 2010—on the earnings report, after missing estimates in 9 of 12 recent quarters.

Gross margin widened to 58.8% of sales from 58.2% a year earlier. Discounts in relation to sales had a negative effect on the gross margin of 0.2 percentage points compared with a year earlier, H&M said.

Although H&M reported lower costs in comparable stores both as a share of sales and in absolute figures, the retailer didn’t explain its improved profits for the quarter. Analysts said they likely were due to lowered expenses.

“They’ve had very good cost control and all those initiatives and investments are starting to pay off,” said Soeren Loentoft Hansen, an analyst at Sydbank A/S, Denmark. “That’s reflected in these better earnings today.”

H&M reported that its first stores in in Lithuania and Serbia had also been very well received on their opening in August, adding that total sales were up 8% in the period from 1 to 24 September.

The company plans to expand into additional online markets next year as well as expanding on its brands COS and & Other Stories lines, Persson said.


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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com