H&M, the world’s second-largest listed fashion retailer, beat first-quarter operating profit expectations on Wednesday (Mar 27), as new CEO Daniel Erver said spring collections were well received and sales showed signs of recovery.

The Swedish group’s shares rose 12 per cent in early trade after it posted an operating profit of 2.08 billion kronor (S$264.2 million), up from 725 million and above the 1.43 billion expected by analysts in an LSEG poll.

The 2 per cent first-quarter fall in sales was less than analysts expected, and sales at the start of its second quarter rose by 2 per cent, 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 per cent operating profit margin this year.

The retailer, known for US$19.99 jeans and dresses under US$15, has been stretching into more expensive clothing, selling leather trousers for more than US$300 and, under its Cos brand, coats for as much as US$1,190.

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Online fast-fashion retailer Shein, which sells US$8 dresses, US$5 t-shirts and US$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. REUTERS