H & M beats earnings forecasts after limiting cuts

STOCKHOLM (Reuters) – Swedish fashion retailer H & M on Friday announced much lower than expected decline in its pre – tax earnings in the first quarter, which sold more products at a hefty price and saw its margins rise. improve.

Shares of the world's largest clothing retailer, after Zara's owner Inditex, jumped 13 percent after its results, dropping from SEK 160 to 0809 GMT, announcing that the cuts would continue to decline in the quarter.

The company has seen its earnings contract and its stock piling up in recent years as a result of slower attendance at its main stores and the speed with which it has responded to fluctuations in demand.

Profit before tax fell to SEK 1.04 billion (US $ 112 million) from US $ 1.26 billion a year ago for the seventh consecutive quarter. But he was well ahead of the $ 708 million forecast in a poll of badysts made by Reuters.

The retailer said this month, from March 1 to 27, net sales rose 7 percent in local currencies, exceeding 4 percent growth in the first quarter.

H & M's heavy investments in logistics and store integration and online to cope with the increasing competition and pressures of digitizing the sector, as well as a thorough review of its stores and brands , have reduced margins.

"Our ongoing transformation work has helped strengthen the collections with full-price sales, lower markdowns and increased market share," said CEO Karl-Johan Persson after the results indicated that turnaround of H & M began to bear fruit.

RBC badysts said they expect an improvement of 5 to 10% in their profits by consensus.

H & M said its gross margin had increased slightly, reaching 50.0% in the first quarter, from 49.9% a year earlier, defying any forecast of falling to 49.4%.

Sales-related markdowns decreased by approximately 1.5 percentage points in the first quarter compared with the previous year, and the retailer said it expects sales to continue to decline relative to second-quarter sales. .

"Favorable trade and mark-up improvements underway (are) likely to put shorts back," Jefferies badysts wrote in a note to the client.