H&M sees supply chain issues ease gradually

H&M Group performed better than expected in the six months to the end of May. Turnover was up 20%, but it is especially noteworthy that profits doubled. Sales in physical stores are recovering after the Covid pandemic.

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In the period between December and the end of May, H&M Group achieved net sales of 103.7 billion Swedish kronor (9.7 billion euros), 20% more than a year ago. The Covid restrictions have been lifted almost everywhere, which means that the physical stores are selling considerably more again. In addition, according to CEO Helena Helmersson, the new collections are well-received, resulting in more full-price sales and fewer discounts.

Nevertheless, the inventory costs have risen by 16%. About 20%, however, can be explained by early orders to avoid delays in the supply chain, increased purchase and freight costs and goods destined for Russia, Barclays says.

The group’s half-year profit after tax also rose to 3.9 billion Swedish krona (364.5 million euros), more than double the 1.7 billion Swedish krona (158.7 million euros) a year earlier. The operating margin amounted to 5.3%. H&M thus performed better than analysts generally expected.

Supply chain on the mend

Looking ahead, the tune was familiar. “Disruption and delays still exist in the supply chain, but are gradually being eased. At the same time, there is substantial inflation. The situation associated with the war in Ukraine and its consequences for our business are continually being evaluated,” says Helmersson, who has not yet decided what to do about Russia and Ukraine. “We are actively looking at various options.”

The company also continues to insist on low prices: “despite the significant inflation in the world, customers must always feel confident that with all the H&M group’s brands they will find the best combination of fashion, price, quality and sustainability.” In June, however, sales were already down 6%.