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H&M profits soar as shoppers return to high street

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·Business Reporter, Yahoo Finance UK
·2-min read
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H&M store: People walking towards and away from Westfield Shopping Centre in Stratford
H&M profits rose as shoppers returned to its physical stores as COVID-19 restrictions were lifted, and as more customers bought items at full price. Photo: Mike Kemp/In Pictures via Getty Images

Hennes & Mauritz (H&M) (HM-B.ST) managed to buck the downbeat trend in the retail sector after posting a 33% growth in quarterly profit and beating expectations.

The Swedish company, which is the world’s second-biggest fashion retailer, saw pre-tax profits of 4.78 billion Swedish crowns (£385m, $471m) in the second quarter of the year, up from 3.59 billion crowns the previous year.

Analysts polled by Refinitiv had on average forecast a 3.87 billion crown profit.

It came as shoppers returned to its physical stores as COVID-19 restrictions were lifted, and as more customers bought items at full price.

Gross margin rose to 52.2% in the three months to the end of May, up from 50.9% in the same period a year ago, it said.

Shares in the Stockholm-listed firm climbed as much as 5% on Wednesday, although they have underperformed the market so far this year.

The company also said it had decided to use an authorisation given by owners at its annual general meeting in May to buy back 3 billion crowns worth of shares.

“Sales in physical stores increased substantially while online continues to do well,” Helena Helmersson, chief executive, said. “Disruption and delays still exist in the supply chain, but are gradually being eased.”

Read more: FTSE runs out of steam amid fears of global slowdown

However, the group did warn that sales could fall as much as 6% in June as the war in Ukraine and supply chain issues take their toll. H&M has a total of 181 stores in Russia, Ukraine and Belarus.

Before the Ukraine invasion, Russia was H&M's sixth-biggest market with 4% of sales in the fourth quarter of 2021.

Meanwhile in China, H&M saw its sales decline over the past year thanks to a consumer boycott over company remarks about the Xinjiang region.

H&M added that it was also looking at accelerating its expansion in South America and has signed a large number of leases.

Richard Chamberlain, analyst at RBC Capital Markets, said in a note to clients that trading in June was up against strong comparable figures but that these would become easier as the year progressed.

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