H&M sales jump as shoppers return after the pandemic

This post was originally published on this site

STOCKHOLM (Reuters) -H&M, the world’s second-biggest fashion retailer, posted a bigger than expected rise in sales in the three months from March, joining its main rival Inditex (BME:ITX) in reporting a rebound in demand after the pandemic.

Net sales were up 17% year-on-year, or 12% when measured in local currencies, at 54.5 billion crowns ($5.4 billion) in its fiscal second quarter, the Swedish company said in a statement on Wednesday.

Analysts polled by Refinitiv had on average forecast sales of 52.8 billion crowns.

Turnover was still below H&M’s pre-pandemic second quarter in 2019, however, when it was 57.4 billion crowns.

“Whilst in a less spectacular manner than Inditex last week, H&M also confirms today that the reopening process in Europe has led to strong demand conditions persisting in recent weeks,” analysts at Jefferies, who have a “hold” rating on H&M shares, said in a note to clients.

“Investors will be keen to better understand the extent to which price recovery is offsetting mounting input pressures and rebuilding costs,” they said.

H&M’s biggest rival Inditex, which owns the Zara brand, reported an 80% jump in quarterly profit last week as post-pandemic demand soared.

H&M shares had fallen 2.5% by 0730 GMT and are now down more than 25% this year.

“Whilst the top line improvement is encouraging, we are mindful that strength in clothing trends over summer could be short-lived as the consumer environment weakens,” JPMorgan (NYSE:JPM) analysts said in a note to clients.

“We note that Nordics sports retailer XXL profit warned on Q2 yesterday evening, and that this followed a warning last week from online clothing pure-play Boozt, with both citing weakening consumer sentiment,” they said.

H&M, which is due to publish its full quarterly earnings on June 29, did not comment on the figures.

In March, H&M, which has the bulk of its business in Europe, flagged price rises this year as it posted a quarterly profit below expectations amid high raw material and transportation costs.

($1 = 10.1396 Swedish crowns)