H&M’s operating profit grows more than expected in third quarter

STOCKHOLM, Sept 24 (Reuters) – Swedish fashion retailer H&M on Thursday reported a bigger than expected rise in June-August operating profit, as CEO Daniel Erver said his push to control costs and make sourcing more efficient was bearing fruit.

Operating profit in H&M’s fiscal third quarter increased to 6.04 billion crowns ($608.63 million) against a year-earlier 4.91 billion crowns and a mean forecast in an LSEG poll of analysts of 5.14 billion.

H&M meanwhile said it expected sales in September to rise by 1% measured in local currencies.

Gross profit margin widened to 54.0% in the third quarter, from 52.9% last year, which included positive one-off effects from tariffs, H&M said. Analysts had expected a margin of 53.4%.

Improvements within purchasing, cost control and operation efficiency contributed to a more profitable business, the CEO said in a statement.

“Although sales developed in a positive direction during the quarter, we see further potential to increase sales going forward,” Erver said.

Sales increased 1% in the quarter measured in local currencies. Analysts had expected sales to grow at a sluggish pace.

Erver said H&M is increasing the share of clothes it is buying in-season, as it tries to react faster to fashion trends, consumer tastes and increasingly unpredictable weather.

Erver became CEO in January 2024 with a mandate to improve profitability and strengthen the ​brand, but investors have been waiting for signs he can revive growth in the face of competition from Shein and Zara owner Inditex.

The billionaire family behind H&M is quietly ‌increasing its stake, fuelling speculation it could take the fast-fashion retailer private.

($1 = 9.9239 Swedish crowns)

(Reporting by Greta Rosen Fondahn and Helen Reid, editing by Terje Solsvik)