H&M Surprises With Stronger-Than-Expected Return to Profit

(Bloomberg) — Hennes & Mauritz AB reported a return to profit that surged far past analysts’ expectations, a bullish sign for purveyors of fast fashion.The Swedish clothing retailer estimated pretax earnings reached about 2 billion kronor ($230 million) in the three months through August, based on preliminary results. That’s eight times the average analyst estimate and almost double the highest forecast. The shares rose as much as 13% in Stockholm Tuesday morning.H&M attributed the earnings to revenue exceeding its expectations, well-received collections and more sales at full price. The report soothed concern about H&M’s perennial issue with a buildup of inventory. Low-cost fashion retailers such as Primark have been gaining market share as consumers return to shops in search of casual wear for working from home.Sales fell to 50.9 billion kronor, a 16% decline in local currencies. Analysts expected 50.8 billion kronor. The quarter improved as H&M began the period with 900 of 5,000 stores temporarily closed. By the end of August, all but 200 were open.H&M will report full earnings on Oct. 1, when investors will get more details on whether it managed to sell more of its unsold inventory. Stock-in-trade was at a record level in relation to annual sales in the second quarter, at 40 billion kronor.Analysts will probably raise their expectations after the results, though the consensus for a significant recovery in sales over the coming six to nine months is too optimistic, Morgan Stanley analysts wrote.Shares of Inditex SA, which is scheduled to report results Wednesday, rose as much as 5.1%.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.