H&M, the world’s second-largest listed fashion retailer, announced a better than expected first-quarter operating profit, boosting its shares by 13%. The company’s new CEO, Daniel Erver, credited the success to the positive response from shoppers to the brand’s spring collections. H&M has been facing stiff competition from larger rivals such as Zara, as well as low-cost online retailer, Shein, which is rapidly gaining market share. Despite this, the company reported a quarterly operating profit of 2.08 billion crowns ($196 million), up from 725 million a year ago, and above the 1.43 billion expected by analysts in an LSEG poll.
While H&M’s sales fell by 2% in the first quarter, this was less than analysts had predicted. Furthermore, sales at the start of the second quarter rose by 2%, indicating stronger demand for their clothing and accessories despite inflation reducing many people’s spending power. Erver stated that the company’s priority is to strengthen sales and reiterated H&M’s goal of reaching a 10% operating profit margin this year. The company plans to refurbish around 250 stores this year to improve the in-store experience for customers.
Additionally, it plans to open around 100 stores in growth markets while closing 160 stores in more established markets, thus reducing its overall store count. H&M is known for its affordable clothing, such as $19.99 jeans and dresses under $15. However, it has been expanding into more expensive clothing, such as leather trousers for over $300 and coats for as much as $1,190 under its Cos brand.
Erver stated that although the company will continue to cater to customers with higher spending power, its prices are expected to decrease by the end of 2024. Former CEO Helena Helmersson unexpectedly resigned in January, citing the intense demands of the role she held for four years.