H&M Surpasses Forecasts with Robust Q3 Operating Profit and Margin Gains
H&M's Financial Performance and Strategic Initiatives in Q3
Stronger Than Expected Operating Profit
STOCKHOLM, Sept 24 (Reuters) - Swedish fashion retailer H&M on Thursday reported a bigger than expected rise in June-August operating profit, as CEO Daniel Erver said his push to control costs and make sourcing more efficient was bearing fruit.
Operating profit in H&M's fiscal third quarter increased to 6.04 billion crowns ($608.63 million) against a year-earlier 4.91 billion crowns and a mean forecast in an LSEG poll of analysts of 5.14 billion.
Sales and Margin Developments
September Sales Outlook
H&M meanwhile said it expected sales in September to rise by 1% measured in local currencies.
Gross Profit Margin Improvement
Gross profit margin widened to 54.0% in the third quarter, from 52.9% last year, which included positive one-off effects from tariffs, H&M said. Analysts had expected a margin of 53.4%.
Improvements within purchasing, cost control and operation efficiency contributed to a more profitable business, the CEO said in a statement.
"Although sales developed in a positive direction during the quarter, we see further potential to increase sales going forward," Erver said.
Strategic Shifts and Leadership
In-Season Purchasing and Market Response
Sales increased 1% in the quarter measured in local currencies. Analysts had expected sales to grow at a sluggish pace.
Erver said H&M is increasing the share of clothes it is buying in-season, as it tries to react faster to fashion trends, consumer tastes and increasingly unpredictable weather.
CEO Mandate and Competitive Landscape
Erver became CEO in January 2024 with a mandate to improve profitability and strengthen the brand, but investors have been waiting for signs he can revive growth in the face of competition from Shein and Zara owner Inditex.
Ownership and Privatization Speculation
The billionaire family behind H&M is quietly increasing its stake, fuelling speculation it could take the fast-fashion retailer private.
Additional Information
($1 = 9.9239 Swedish crowns)
(Reporting by Greta Rosen Fondahn and Helen Reid, editing by Terje Solsvik)
