H&M shares jump 17 per cent despite dip in profits
H&M investors today welcomed news of strong summer sales, with shares in the brand soaring despite the retailer posting a dip in profits.
Operating profit at the global fashion brand for the second quarter came in at SEK 4.74bn (£3.46bn), down year on year from SEK 4.98bn (£3.64bn) but above forecasts of SEK 4.07bn, with H&M blaming high raw material and freight costs alongside a strong US dollar for the dip.
However, the brand was positive about summer trading, with the fashion giant reporting increased sales in its physical stores over the last six months and a robust start to the summer.
“The summer collections have been well received and the third quarter has got off to a good start,” Helena Helmersson, chief executive of H&M, said.
Shares in the company, which also owns Monki and Cos, jumped after the update, trading up around 17 per cent by mid-afternoon.
“Shares in H&M have surged by over 10 per cent today thanks to its upbeat commentary about summer sales. The stock has by nearly 50 per cent year-to-date, outperforming its biggest rival, Inditex in percentage terms,” Victoria Scholar, head of investment at Interactive Investor, said.
“In order to deal with cost of living pressures, H&M has been focusing more on its Cos brand, which is at a higher price point, appealing to customers with greater disposable incomes during these turbulent macroeconomic times,” she added.
H&M said the hike came despite the brand having 300 fewer stores than last year, with the retailer announcing a number of store closures last year to cut costs. The brand is poised to open 100 new stores in growth markets.
The retailer also said it intends to sell more of its third party brands, such as Monki and Weekday, on its website in efforts to strengthen sales.