Profits at H&M have risen as customers rush back into stores
Consumers have started to flock to Hennes & Mauritz AB (H&M) to replenish their post-Covid wardrobes, helping the company beat analysts’ expectations for the second quarter of the fiscal year 2016.
In the three months ending in May, the Swedish low-cost retailer reported a pre-tax profit of 4.78 billion kronor ($470 million). Analysts had predicted earnings of $3.98 billion. Despite this, H&M expects sales to fall 6% in June as a result of the conflict in Ukraine.
According to CEO Helena Helmersson: “Well-received collections have led to solid development, with a further increase in full-price sales and a decrease in markdowns.“
Stockholm shares jumped as much as 4.7 percent before they began paring the gains.
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After two years of primarily staying at home, consumers are looking to update their outfits in preparation for work and special events, which has led to a comeback in sales at H&M and other competing brick-and-mortar businesses. Having said that, rising costs across the board, including those for energy, transportation, and food, are putting a strain on consumer budgets and eroding their confidence. Some merchants are seeing their profit margins shrink as a direct result of rising costs.
The conflict in Ukraine and the intermittent lockdowns in sections of China, where H&M has been the target of a boycott because of its unwillingness to utilize cotton sourced from the Xinjiang area, are not helping the situation. While the company has temporarily halted sales in Russia as a result of the invasion, its flagship location in Shanghai is being shut down.
As a direct result of the difficulties it is currently experiencing, H&M has stated that it is investigating different ways to “prioritize initiatives, redistribute resources, and ensure continuing good profitability.”
This year, the share price of H&M has decreased by more than 30 percent as a direct result of warnings from industry analysts who predict that the company’s profitability will take a hit. The corporation has articulated its goal to improve its position in the market by increasing prices at a rate that is lower than that of its rivals.
