- Angela Gonzalez-Rodriguez
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New York – Hennes
and Mauritz’s first-quarter results beat expectations on profit and
margin, which was argued by the retailer as proof that its turnaround
strategy is working.
The world’s second-largest clothing retailer reported pre-tax
profit of 1.04 billion Swedish crowns for the quarter to February 28,
2019. Although that fell short of the 1.26 billion Swedish crowns it
posted in the previous comparable period, it still came in well ahead
of the 708 million that analysts polled by Reuters forecast. Gross
margin also beat analysts’ expectations.
H&M reported a much smaller than expected fall in quarterly profit
thanks to selling more products at full price and margins held up, in
what the market has taken as a first sign that its turnaround strategy
is producing results.
H&M’s Q1’s positive results were the result of ongoing
improvements in buying and logistics
“Our ongoing transformation work has contributed to stronger
collections with increased full-price sales, lower markdowns and
increased market shares,” Karl-Johan Persson, H&M’s CEO, said in a
statement presenting the results. He added that the positive results
were the result of ongoing improvements in buying and logistics, which
led to a 1.5 percent reduction in the markdowns in relation to sales,
compared to the corresponding quarter the previous year.
Still, H&M’s margins continue to lag Inditex, which reported a
gross margin of 56.7 percent for the full year ending January 2019.
RBC analyst Richard Chamberlain said in a note that he expected
consensus for H&M’s earnings for the full year ending in November 2019
to be upgraded by 5 to 10 percent. Analysts polled ahead of results
had expected full-year pretax profit of 15.40 billion crowns versus
15.64 billion a year earlier, reported Reuters.
“Sales developed well both in stores and online in many markets,
including Sweden which grew by 11 percent, the UK by 8 percent, Poland
by 15 percent, China by 16 percent and India by 42 percent in local
currencies.”
On the trading floor, the company’s shares soared, adding as much
as 15.8 percent on Friday soon after the Swedish group said it
expected sales at discounted prices to continue to fall in the current
quarter.
Image: First quarter report, Investor Relations, H&M
