First profit rise for H&M in two years

H&M has published its full results for the third quarter: for the first time in two years, the Swedish fashion group has seen a rise in its profits.

Better than expected

Pre-tax profit in the quarter from June to August exceeded expectations and rose from 4.01 billion Swedish crowns (370 million euros) to 5.0 billion crowns (460 million euros). According to Reuters, analysts had predicted profits in the region of 4.93 billion crowns (450 million euros). This rise in profit is the first since the second quarter of 2017.

“More full-price sales and reduced markdowns contributed to a 26 % increase in operating profit in the third quarter”, CEO Karl-Johan Persson said in the presentation of the results.

Shares

On 16 September, H&M had already said that the third quarter’s sales growth was the strongest in three years, and had been boosted by a well-received summer collection. The fashion group then announced a 12 % turnover increase to 55.8 billion crowns (then 5.23 billion euros). However, there was unrest on the stock market and share prices tumbled, as investors feared that profit margins might once more be squeezed a result of investments.

This fear has now proven to be unjustified: the gross margin has increased from 50.3 % to 50.8%  and the operating profit margin has risen from 7.1 % to 8.0 %.