H&M flags more price hikes, profits boosted by fewer discounts

By Supantha Mukherjee and Anna Ringstrom

STOCKHOLM (Reuters) -Price range style group H&M expects to lift costs additional this yr, it mentioned on Wednesday after reporting forecast-beating earnings with margins benefiting from fewer reductions.

H&M within the first half of the yr raised costs within the face of upper transport and uncooked materials prices, and Chief Government Officer Helena Helmersson advised Reuters costs would probably rise additionally all through the remainder of the yr. Hikes would range between markets relying on the aggressive scenario, she mentioned.

“Though many of the restrictions related to the Covid-19 pandemic basically appear to be over, many challenges stay. Disruption and delays nonetheless exist within the provide chain, however are regularly being eased. On the identical time, there’s substantial inflation,” H&M mentioned.

Pretax revenue on the world’s second-biggest style retailer jumped 33% from a yr earlier to 4.78 billion crowns ($471 million) within the Swedish group’s second quarter, on gross sales progress of 12% measured in native currencies.

H&M’s shares have been up 5% at 1133 GMT after the group posted the leap in March-Could revenue as buyers returned to its shops within the aftermath of the pandemic.

A rise in full-price gross sales and a lower in markdowns helped H&M enhance its working margin to 9.2% from 8.3% within the second quarter regardless of increased prices.

“Gross sales in bodily shops elevated considerably whereas on-line continues to do properly,” Helmersson mentioned in an announcement.

Analysts polled by Refinitiv had on common forecast a 3.87 billion crown revenue.

Native-currency gross sales in June, the primary month of H&M’s third quarter, fell 6%, principally as a result of it halted its enterprise in Russia, Ukraine and Belarus. Russia was H&M’s sixth-biggest market with 4% of gross sales within the fourth quarter of 2021.

RBC analyst Richard Chamberlain mentioned in a observe to purchasers the June gross sales have been decrease than anticipated. In June 2021, gross sales soared as over 1,000 closed shops re-opened after closing briefly as a result of pandemic. CEO Helmersson famous that July and August comparisons can be much less robust.

In China, H&M has seen gross sales hunch over the previous yr amid a client boycott over the corporate’s place on the Xinjiang area and a basic hunch in client demand attributable to COVID-19 lockdowns.

H&M’s greatest rival, Inditex, the proprietor of Zara, reported an 80% leap in revenue earlier this month in its fiscal first quarter on the again of hovering gross sales.

H&M additionally mentioned on Wednesday it had determined to make use of an authorisation given by homeowners at its annual basic assembly in Could to purchase again 3 billion crowns price of shares.

($1 = 10.1538 Swedish crowns)

(Reporting by Supantha Mukherjee and Anna Ringstrom in Stockholm; Modifying by David Clarke, Elaine Hardcastle)