H&M is running in Stockholm, second quarter profit better than expected

(Il Sole 24 Ore Radiocor) - Hennes and Mauritz shines on the Stockholm Stock Exchange thanks to the good reception given to the second quarter results. The stock of the Swedish ready-to-wear giant has gained more than five points, which places it in first place among the components of the Omx Nordic 40 index and among the best of the Stoxx Europe 600. H&M recorded a second-quarter operating profit slightly higher than expected, while sales fell more than expected. Investors have however focused on the trend of earnings rather than revenues , given that CEO Daniel Erver has stated that his priority is profitability and not simple sales growth.

In the second quarter (to May 31), H&M reported sales of SEK 56.7 billion, compared to SEK 59.6 billion last year and below the SEK 57 billion expected by analysts on average. Operating profit fell to SEK 5.91 billion (from SEK 7.1 billion), but slightly exceeded the consensus (SEK 5.88 billion), with a margin of 10.4%. "This slightly better than expected margin sends a positive signal to the market," noted analysts at Alphavalue. Net profit fell to SEK 3.96 billion from SEK 5.06 billion a year ago. "The quarter's result was negatively affected by higher purchase prices due to the strengthening dollar and higher transportation costs, but also by the fact that we continued to invest in our customer offering," said CEO Erver.

H&M also said that its sales in local currencies for the quarter increased by 1%, and when factoring in store closures compared to last year, this represents an increase of 3%. The currency effect then had a negative impact of around 6% percentage points, reflecting the strengthening of the Swedish krona. The world's second-largest fashion retailer also estimated that its June revenues in local currencies increased by 3% compared to the same month last year, despite a negative impact of around 1 percentage point due to the calendar. This is a significant improvement compared to the 6% decline recorded last year.

“Our plan, focused on product offering, shopping experience and brand, has been confirmed again by the progress we see,” said CEO Erver, also highlighting the contribution made to profitability by cost control . The CEO added a note of caution, declaring that the group, given “the uncertain times that make consumers cautious, continues to closely monitor macroeconomic and geopolitical developments and continuously adapt both the customer offering and the business to best meet customer needs.” Analysts at Jefferies and Deutsche Bank both maintained their neutral recommendation on the stock.