H&M bounces back from coronavirus slump, Retail News, ET Retail

By : Anna Ringstrom

STOCKHOLM : Sweden’s H&M, the world’s next-greatest trend retailer, conquer quarterly profit forecasts as it recovered extra quickly than envisioned from a coronavirus-induced slump, in a good indicator for the market.

Gain before tax for June-August, the firm’s 3rd quarter, came in all over two billion Swedish crowns ($229 million).

That was nicely underneath 5 billion crowns a year earlier, but considerably bigger than analysts’ imply forecast of 191 million crowns, according to Refinitiv’s SmartEstimate model, which is weighted in the direction of extra current estimates and bigger-rated analysts.

“H&M group’s restoration is much better than envisioned,” the business mentioned in a statement on Tuesday. “Far more whole-price revenue put together with strong price tag control enabled the business to by now turn to profit in the 3rd quarter.”

Gross sales fell 19% to fifty.9 billion crowns, from expectations for an eighteen% fall. In area currencies, the fall was sixteen%.

“Very good news and nicely previously mentioned consensus,” mentioned Societe Generale analyst Anne Critchlow of the 3rd-quarter profits.

She has a ‘hold’ score on the shares, which had been up 11% in early trade, cutting down their year-to-day drop to sixteen%.

Soon immediately after business veteran Helena Helmersson changed the grandson of H&M’s founder as CEO in January, the pandemic slammed H&M, pushing it into a deep decline in the March-May possibly quarter as revenue halved.

The business, which will publish its whole quarterly report on Oct. 1, has been slicing workers, opening fewer new outlets than planned and permanently closing others to cut charges.

“Soon after its Q2 benefits, administration warned that elevated markdowns would hamper its earnings by all over two-three%-factors, but this now seems to have reversed to a slight good influence,” analysts at Carnegie mentioned in a note.

Analysts have been warning it will acquire time for trend retailers’ revenue to get well to pre-pandemic degrees, and current signs of next waves of COVID-19 infections in some nations around the world have additional to the uncertainty.

RBC analyst Richard Chamberlain, with a ‘sector perform’ score on H&M, mentioned H&M’s profit improvement augured nicely.

“We consider most of this can be sustained likely forward and assume consensus profit before tax updates for 2021-22 in the variety of 5-10% subsequent today. We also consider this is a good read for the apparel sector in normal, eg, (Primark proprietor) ABF , Inditex and Next,” he mentioned.

H&M’s greatest rival, Zara proprietor Inditex, will report May possibly-July benefits on Wednesday. Britain’s Next and John Lewis report on Thursday.