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H&M Group is seeing improved profitability as tighter cost control, more efficient operations and a greater focus on in-season purchasing support its performance. The Swedish fashion retailer reported a stronger-than-expected rise in operating profit for the June-August quarter and expects September sales to grow 1% in local currencies, according to media reports.
Operating profit for Q3 increased to SEK 6.04 billion (€535.3 million/£460 million/$608.6 million), up from SEK 4.91 billion in the same period last year and ahead of analysts’ forecasts.
Net sales edged up to SEK 57.189 billion from SEK 57.017 billion a year earlier. In local currencies, sales grew 1% year on year, despite H&M operating around 2% fewer stores at the end of the quarter.
Gross profit rose to SEK 30.867 billion from SEK 30.143 billion, while gross margin improved to 54% from 52.9%. However, the quarterly margin benefited from one-time effects of around 1.6 percentage points related to tariffs and goods imports that had increased the cost of goods sold in previous quarters.
Selling and administrative expenses declined 1% to SEK 24.832 billion. Net profit also increased to SEK 4.098 billion from SEK 3.212 billion in the year-ago period.
For the first nine months of the financial year ending August, net sales declined to SEK 161.624 billion from SEK 169.064 billion, although they remained broadly flat in local currencies. Gross margin increased to 53.9% from 52.5%, while operating profit rose to SEK 13.462 billion from SEK 12.031 billion.
H&M CEO Daniel Ervér said the company’s efforts in purchasing, cost control and operational efficiency had contributed to improved profitability. He added that while sales had developed positively during the quarter, there was further potential to increase sales.
H&M said its summer collections were well received and supported better sales development, particularly towards the end of the quarter. Sales, however, continued to be affected by disruptions in Europe’s logistics network and the global supply chain.
The company also made further progress in developing its digital infrastructure during the quarter. Over time, these investments are expected to improve precision across the value chain, covering product development, purchasing, allocation, marketing and sales. H&M is also moving more decision-making closer to customers as its simplified organisational structure takes shape.
The retailer is gradually increasing its proportion of in-season purchasing to respond more quickly to customer demand for fashion and quality at competitive prices. As it enters the autumn season, H&M said its inventory composition was in a good position to meet customer needs.
