Sweden's H&M, the world's second-biggest fashion retailer, beat quarterly profit forecasts as it recovered more quickly than expected from a coronavirus-induced slump, in a positive sign for the industry.
Profit before tax for June-August, the company's third quarter, came in around 2 billion Swedish crowns ($229m).
That was well below 5 billion crowns a year earlier, but much higher than analysts' mean forecast of 191 million crowns, according to Refinitiv's SmartEstimate model.
"H&M group's recovery is better than expected," the company said in a statement today. "More full-price sales combined with strong cost control enabled the company to already turn to profit in the third quarter," it added.
Sales fell 19% to 50.9 billion crowns, against expectations for an 18% drop. In local currencies, the fall was 16%.
Shortly after company veteran Helena Helmersson replaced the grandson of H&M's founder as CEO in January, the pandemic slammed H&M, pushing it into a deep loss in the March-May quarter as sales halved.
The company, which will publish its full quarterly report on October 1, has been cutting staff, opening fewer new stores than planned and permanently closing others to cut costs.
"After its Q2 results, management warned that increased markdowns would hamper its earnings by around 2-3%-points, but this now appears to have reversed to a slight positive effect," analysts at Carnegie said in a note.
Analysts have been warning it will take time for fashion retailers' sales to recover to pre-pandemic levels, and recent signs of second waves of Covid-19 infections in some countries have added to the uncertainty.
H&M's biggest rival, Zara owner Inditex, will report May-July results tomorrow. Britain's Next and John Lewis are due to report on Thursday.