Swedish fashion group H&M has today reported a substantially larger than expected rise in third-quarter profit as customers responded well to its autumn collections, although the company warned of a tariff-related impact in the current quarter.
Shares in the world's second-largest listed apparel retailer soared 10% in mid-morning trade, taking a year-to-date rise to 16%.
"The autumn collections have been well received," H&M said in a statement.
Daniel Erver, CEO since January 2024, has been working to improve profitability and appeal to shoppers with trendier styles, aiming to compete with fast-fashion rivals Shein and Inditex's Zara as the sector contends with disruption from US tariffs.
"We are taking further steps in the right direction," he said today.
After two consecutive quarters of falling earnings, H&M said June-August operating profit jumped to 4.91 billion crowns ($523m) from a year-ago 3.51 billion supported by a 2% increase in local-currency sales, a stronger product mix and tighter cost control.
Analysts polled by LSEG had on average forecast a profit of 3.68 billion crowns.
H&M cautioned that tariffs on imports would weigh more heavily on margins in the current quarter, which runs until November.
JP Morgan analysts said the profit beat may prompt higher expectations for the full year, noting meanwhile that the comment on tariff impact may be slightly more subdued than some had anticipated.
Analysts at JP Morgan and Alphavalue also welcomed a 9% drop in inventory levels as the retailer said shoppers were buying more products in season - at full price rather than in end-of-season sales.
H&M said markdowns in the quarter were marginally bigger than a year ago, and that it expects them to be up somewhat in the fourth quarter, partly because Black Friday falls one day earlier.
Sales in reported currency fell to 57 billion crowns from 59 billion, slightly above the expected 56.8 billion.
The company said it expected local-currency sales in September to be flat compared with an unusually high year-ago figure.
H&M, whose customer base is considered more price-sensitive than Inditex's, has faced greater pressure in recent years as consumers tighten spending amid higher living costs and global uncertainty.
The outlook for higher US tariffs has pushed H&M to seek suppliers closer to the US market - its second-biggest after Germany, accounting last year for 13% of group sales.
