H&M Q3 Profit Jumps 22%, Beating Estimates

In Industry News, Reports, What's New by Jeff PrineLeave a Comment

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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