H&M reports surprise profit despite weak demand

STOCKHOLM Reuters reported on Thursday a surprise operating profit for the December-February period, despite the weak demand of consumers as they curtailed spending in the wake of soaring inflation.

In the first quarter of the Swedish group's fiscal year, the Swedish group's operating profit was 725 million Swedish crowns $69.73 million against a 458 million profit a year ago and a mean loss of 1.10 billion, according to a Refinitiv poll of analysts.

The company said that it had boosted earnings by about 1 billion crowns, as a result of consolidating the earnings of the Sellpy second-hand platform.

H&M showed signs of bringing its costs under control, but it still struggled to compete with big rivals Inditex, owner of Zara and other brands, as well as rapidly expanding fast fashion online retailers such as SHEIN and Temu.

The external factors that influence purchasing costs continue to improve, work on the cost and efficiency programme is at full speed and many of the changes we have made in recent years are beginning to have an effect, Chief Executive Helena Helmersson said in a statement.

H&M's first quarter revenue, released separately on March 14, was worse than feared, as the small increase in sales missed most estimates, analysts said at the time.

After the pandemic, H&M's more cost-conscious base has resisted as inflation eats into purchasing power, while SHEIN and Temu won success online with cut-price items such as $10 dresses.