H&M Earnings Return to Growth After Two-Year Slump

STOCKHOLM, Sweden — Hennes & Mauritz AB's quarterly earnings gained for the first time in more than two years as a well-received summer collection helped the Swedish retailer boost profitability.

Pretax profit rose 25 percent to 5.01 billion kronor ($507 million) in the three months through August, which is the company’s fiscal third quarter. Analysts expected 4.89 billion kronor.

Key Insights

H&M has been making some progress reducing its high inventory level, which stood at 42 billion kronor at the end of August. Inventory as a proportion to sales fell to 18.5 percent. H&M has pledged to eventually reduce that to 14 percent or lower, a level last seen three years ago.

Sales have gained for the six past quarters, though part of the growth is coming from foreign-exchange moves. A weaker krona also makes it more expensive to source goods from Asia. Revenue rose 8 percent in local currencies in September, the first month of the fourth quarter.

Fast fashion has been a cutthroat market lately, with US chain Forever 21 Inc. filing for bankruptcy earlier this week. H&M recently slashed prices to as low as $5.99 for skinny jeans and $17.99 for a dress with a belt.

Market Reaction

The stock has advanced 46 percent this year. H&M’s stock can be volatile because short sellers have bet against 15 percent of the company’s freely traded shares, according to IHS Markit data.

By Thomas Mulier; editors: Eric Pfanner, Thomas Mulier and Thomas Pfeiffer.