H&M returns to profit as decline in clothing sales moderates

[STOCKHOLM] Hennes & Mauritz (H&M) returned to profit in the fiscal third quarter as the Swedish clothing retailer reopened the bulk of its shops and the sales decline moderated.

Pretax profit was about two billion kronor (S$311.2 million), based on preliminary results. Sales fell to 50.9 billion kronor, a 16 per cent decline in local currencies. Analysts expected 50.8 billion kronor.

KEY INSIGHTS

H&M attributed the earnings to revenue exceeding its expectations, well-received collections and more sales at full price. The company will report final results for the period, which ran through August, on Oct 1.

Sales improved throughout the quarter as the period started with 900 of 5,000 stores being temporarily closed. By the end of August, only 200 remained so.

The big question is how H&M's inventory buildup is doing. Inventory was at a record level in relation to annual sales in the second quarter, at 40 billion kronor. Investors will have to wait until the full report in October for that information.

H&M shares have dropped 26 per cent this year.

BLOOMBERG