By Marie Mannes and Helen Reid
STOCKHOLM (Reuters) -H&M, the world's second-largest listed fashion retailer, beat first-quarter operating profit expectations on Wednesday, as new CEO Daniel Erver said spring collections were well received and sales showed signs of recovery.
The Swedish group's shares rose 12% in early trade after it posted an operating profit of 2.08 billion crowns ($196 million), up from 725 million and above the 1.43 billion expected by analysts in an LSEG poll.
The 2% first-quarter fall in sales was less than analysts expected, and sales at the start of its second quarter rose by 2%, reflecting stronger demand for its clothing and accessories.
"The quarter's sales gradually improved during February with well-received spring collections, which is a positive sign that we are on the right track," said CEO Daniel Erver, who has been in the role for two months.
"Our top priority is to strengthen sales," he added, also reiterating H&M's goal of reaching a 10% operating profit margin this year.
The retailer, known for $19.99 jeans and dresses under $15, has been stretching into more expensive clothing, selling leather trousers for more than $300 and, under its Cos brand, coats for as much as $1,190.
Online fast-fashion retailer Shein, which sells $8 dresses, $5 t-shirts and $2 jewellery pieces, has eaten into H&M's share of the lower end of the market, while bigger rival Zara has extended its dominance in the sector.
In an effort to improve the in-store experience, H&M said it is refurbishing around 250 stores this year, a "significant increase" compared to last year. It plans to open around 100 stores, mainly in growth markets, and close 160 stores in more established markets.
(Reporting by Marie Mannes in Stockholm and Helen Reid in London; editing by Louise Rasmussen, Jason Neely and Barbara Lewis)
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