H&M reports steady profit despite lower sales

STOCKHOLM: Swedish fast-fashion giant H&M reported Thursday a drop in sales for its second financial quarter, with operating profit holding steady but below the level analysts were expecting.

Net sales fell to 54.8 billion kronor (US$5.6 billion) in the three months from March to end-May, from 56.7 billion kronor in the period last year.

Operating profit was largely unchanged at 5.91 billion kronor, but analysts were expecting an increase to around 6.4 billion kronor, according to a compilation of estimates by Modular Finance.

The company said operating profits were impacted by a one-time charge of 679 million kronor related to the “implementation of organisational changes”.

“We have continued to reduce the complexity of the organisation and moved decisions closer to the customer. The changes enhance our local relevance and create better conditions to meet customers’ needs faster,” chief executive Daniel Erver said in a statement.

However, “The tighter inventory management has, in some cases, affected our ability to fully meet demand”, Erver added.

The company added that revenue for June was expected to be “on par” with the same month last year, in local currency terms.

As of May 31, the group had 4,038 stores, 128 fewer than a year earlier.

Online sales continued to grow and now account for just over 30% of sales, the company said.