By Marie Mannes and Helen Reid
STOCKHOLM (Reuters) -H&M, the world's second-largest listed fashion retailer, reported a stronger than expected first-quarter operating profit, sending its shares up 13% as new CEO Daniel Erver said shoppers liked the brand's spring collections.
The Swedish group has struggled to maintain its position in the fast-fashion sector as bigger rival Zara extended its dominance and low-cost online retailer Shein, which sells $8 dresses, $5 t-shirts and $2 jewellery, rapidly gains market share.
On Wednesday, H&M posted a quarterly operating profit of 2.08 billion crowns ($196 million), up from 725 million a year ago, and above the 1.43 billion expected by analysts in an LSEG poll. Its shares were set for their best day since June.
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, even as inflation has reduced many people's spending power.
"Our spring collections have been well received, especially in women's wear and our Cos collection," CEO Daniel Erver, who has been in the role for two months, told analysts on a call.
Erver said the company's priority is to strengthen sales, also reiterating H&M's goal of reaching a 10% operating profit margin this year. Former CEO Helena Helmersson quit unexpectedly in January, citing the intense demands of the role she held for four years.
Known for $19.99 jeans and dresses under $15, H&M 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.
Erver told analysts that strategy would continue to cater for customers with higher spending power, but on average he expects the retailer will have lower prices at the end of 2024 than at the start.
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, as it shrinks its store count overall.
(Reporting by Marie Mannes in Stockholm and Helen Reid in London; editing by Louise Rasmussen, Jason Neely and Barbara Lewis)
Did you find this insightful?
Bad
Just Okay
Amazing