H&M upbeat as Q2 shows recovery, Q3 starts well
H&M Group surprised us in a good way on Thursday with the fashion retail giant reporting a bigger pre-tax profit than had been expected for Q2. That came as countries around the world eased their lockdowns.
And the company said that Q3 so far is “almost back at the level we were at before the pandemic”, while online continues to prosper, despite most stores now being open.
The month of June has seen total sales up as much as 25% in local currencies. It said earlier that the first two weeks of June had seen sales above 2019 levels. But like-for-like sales are still slightly negative on a two-year comparison and it gave no update on how sales are going in China, with analysts at Jefferies suggesting in a note on Thursday that China could be a difficult market for it at present.
The group — which is the second largest fashion retailer globally — made a Q2 pre-tax profit of SEK3.59 billion (€354m/£303m/$419m) after making a loss of SEK6.48 billion this time last year. Analysts had expected a return to profit but that it would be about SEK17 billion smaller.
Gross profit rose 89% to SEK25.049 billion, which corresponds to a gross margin of 53.9%, much better than the 46.3% of a year ago.
That all came as net sales reached SEK46.509 billion, up from SEK28.664 billion a year earlier. At the start of the quarter, around 1,300 stores were temporarily closed, but by the end, only around 140 stores remained closed.
For the first half — the six months to the end of May — net sales in local currencies rose 12% year-on-year to SEK86.569 billion and footfall continued to be an issue. At the most, around 1,800 stores (or 36% of its entire estate) were temporarily closed.
H1 profits after financial items increased to SEK 2.204 billion from a loss of SEK3.978 billion a year ago. Net profit rose to SEK1.697 billion from a loss of SEK3.063 billion.
Importantly too, “online sales have continued to develop very well, even as stores have been allowed to reopen”.
The company has carried on expanding its operations and in March H&M opened online in Qatar via franchise. During the second quarter, it was also successfully launched on e-commerce platform Zalora in Indonesia, the Philippines, Malaysia and Singapore.
And Cambodia will become a new H&M market via franchise in 2022.
Its customer loyalty programme now has around 130 million members in 27 markets, an increase of 50 million members in a year.
Meanwhile, Sellpy, the second-hand platform part-owned by H&M group, has been launched in an additional 20 markets and is now available in a total of 24 markets.
CEO Helena Helmersson said: “With our much-appreciated collections, our ongoing transformation and the fact that markets are gradually being opened up, our recovery is strong. Online sales have continued to develop very well even as the stores have opened, which shows that customers appreciate the collections and being able to shop via their preferred channel.”
And she seems to be upbeat for the future. “As more and more people are vaccinated and restrictions are eased, the world is gradually opening up and customers can once again visit our stores. Our recovery is strong. The third quarter started well and we are almost back at the level we were at before the pandemic. The lessons we have learned are enabling us to be even better and faster at making the most of new opportunities, and we are optimistic.”
She added that in the wake of the pandemic, “we are seeing increasing demand globally for fashion that provides value for money and is sustainable, which we are well positioned for. Our brands are also offering an increasing number of services for a more sustainable lifestyle.”
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