H&M Shares Rise After Q2 Profit Beat

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H&M Shares Rise After Q2 Profit Beat

By Scott Kanowsky 

Investing.com -- Shares in H&M (ST: HMb ) rose in early trading on Wednesday, after the fast-fashion giant reported a 33% year-on-year jump in second quarter pre-tax earnings, beating expectations.

The world's second-largest clothing retailer posted profit after financial items of SEK 4.78B, ahead of estimates of SEK 3.87B. H&M credited the bump in earnings to an increase in sales of full-price items and lower markdowns, while in-store demand also moved "substantially" higher. The Swedish company also saw its gross margin for the period rise to 52.2%.

H&M added that while most COVID restrictions impacting performance seem to be mostly finished, headwinds remain to its outlook. The company noted challenges stemming from supply chain disruptions, a spike in inflation, and the war in Ukraine.

The group said its stoppage of business in Russia, Ukraine, and Belarus due to the conflict will contribute heavily to a projected 6% fall in June sales in local currencies.

"The situation associated with the war in Ukraine and its consequences for our business are continually being evaluated," said H&M CEO Helena Helmersson in a statement. "We are actively looking at various options to find solutions that give consideration to customers and colleagues as well as the impact on the business as a whole."

Meanwhile, group-wide sales for the second quarter jumped by 12% compared to the previous year to SEK 54.5B, above forecasts. Analysts had predicted quarterly sales of SEK 52.8B.

Earlier this month, H&M also reported a better-than-expected 17% rise in March-May sales, thanks in part to relaxation in COVID rules. However, demand during the period still came in below pre-pandemic levels.

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