Fast-fashion retailer H&M surprises with spring recovery

H&M, the world’s second-largest listed fashion retailer, reported a stronger than expected first-quarter operating profit, sending its shares up 13%, as new CEO Daniel Erver said shoppers liked the brand’s spring collections.

The Swedish group has struggled to maintain its position in the fast-fashion sector as bigger rival Zara extended its dominance and Chinese online retailer Shein, which sells US$8 dresses, US$5 t-shirts and US$2 jewellery, grew rapidly.

After such rivals snatched market share over the last year, Erver said the company must concentrate on its core clientele.

“Where we want to be laserfocused on being a credible fashion brand is for the younger female customer,” he said in an interview with Reuters, adding that women in their 20s and 30s are “tremendously important” for H&M.

Erver took over as CEO after Helena Helmersson quit unexpectedly in January, citing the intense demands of the role she held for four years.

On Wednesday, Erver said the company’s top priority was to boost sales, in a departure, welcomed by the market and analysts, from H&M’s previous emphasis on profitability.

“That’s what has been really lacking, especially last year,” said

Daniel Schmidt, analyst at Danske Bank in Stockholm.

“Since coming out of the pandemic sales have been flatlining, which has stood out compared to competitors.”

H&M posted a quarterly operating profit of 2.08 billion crowns (RM928 million), up from 725 million a year ago, and above the 1.43 billion expected by analysts in an LSEG poll.

Its shares were set for their best day since June.

The 2% first-quarter fall in sales was less than analysts expected, and sales at the start of its second quarter rose by 2%, reflecting stronger demand for its clothing and accessories.

H&M’s spring collections, with a colour palette of blue, white, and silver, have been popular with shoppers, Erver said.

Part of that sales boost is also a result of more discounting in the first quarter, with the retailer planning more markdowns this quarter too, to lure new customers and drive more frequent purchases, Erver said.

Known for US$19.99 jeans and dresses under US$15, H&M has been stretching into more expensive clothing, selling leather trousers for more than US$300 and, under its Cos brand, coats for as much as US$1,190. – Reuters