Budget fashion group H&M expects to raise prices further this year, on Wednesday after reporting forecast-beating profits with margins benefiting from fewer discounts.
In the first half of the year, H&M raised prices due to higher transport and raw material costs, and Chief Executive Officer Helena Helmersson told Reuters prices would likely go up throughout the rest of the year. She said that hikes would vary depending on the market, depending on the competitive situation.
Although most of the restrictions associated with the Covid-19 Pandemic seem to be over, many challenges remain. The supply chain is being slowed but are slowly being dragged down. There is substantial inflation at the same time, according to H&M.
Pretax profit at the world's second biggest fashion retailer jumped by 33% from a year ago to 4.78 billion crowns $471 million in the Swedish second quarter, a rise of 12% in local currencies.
H&M's shares were up 5% at 1133 GMT after the group posted a March-May profit as shoppers returned to its stores in the aftermath of the pandemic.
H&M's operating margin went from 8.3% to 9.2% in the second quarter despite higher costs, despite an increase in full-price sales and a decrease in markdowns.
Helmersson said online sales in physical stores increased significantly while sales in physical stores continue to do well.
The H&M clothing store is seen in Times Square in Manhattan, New York, November 15, 2019.
Analysts polled by Refinitiv had a 3.87 billion crown profit.
In June, the first month of H&M's third quarter, local-currency sales fell 6%, mostly because it stopped its business in Russia, Ukraine and Belarus. Russia was H&M's sixth-biggest market with 4% of sales in the fourth quarter of 2021.
RBC analyst Richard Chamberlain said in a note to clients that the June sales were lower than expected. In June 2021, sales soared as over 1,000 closed stores were re-opened after closing temporarily due to the Pandemic. CEO Helmersson said that comparisons would be less tough in July and August.
In China, H&M has seen sales slump over the past year due to a consumer boycott over the company's position in the Xinjiang region and a general slump in consumer demand due to COVID 19 lockdowns.
H&M's biggest rival, Inditex, the owner of Zara, reported an 80% jump in profit in the first quarter on the back of soaring sales.
H&M said on Wednesday it had decided to use an authorisation from owners at its annual general meeting in May to buy back 3 billion crowns worth of shares.