H&M returns to profit as it looks to emerge ‘stronger’ post-Covid

H&M recorded profit before tax of SEK2bn (£174bn) in the three months to August 31, despite a drop in sales.

The group, which also operates brands such as Cos, Monki and & Other Stories, saw sales decline 16% in local currencies in the third quarter. In Swedish krona, net sales were down 19% to SEK50.87bn (£4.43bn).

H&M attributed its return to profit to its cost controls including rent renegotiations, more full-price sales and appreciated collections. 

Sales in September have also continued to show improvement, down just 5% year on year.

Like the rest of the fashion industry, H&M suffered a difficult few months during the lockdown period with up to 80% of its global store estate closed during the second quarter.

At the beginning of the third quarter, around 900 of the group’s 5,000 stores were temporarily closed, but by the end of the quarter, just over 200 stores were temporarily closed.

H&M has said that in the coming year it will look to close a net 250 of its least profitable stores. 

Helmersson said: “Although the challenges are far from over, our assessment is that the worst is behind us and we are well placed to come out of the crisis stronger. More and more customers started shopping online during the pandemic, and they are making it clear that they value a convenient and inspiring experience in which stores and online interact and strengthen each other.

“We are increasing digital investments, accelerating store consolidation and making the channels further integrated. To ensure that our offerings are relevant to customers and improve availability in all channels, speed and flexibility will be even more important in the future, particularly in the supply chain. Covid-19 has also highlighted the importance of sustainability.

“Demand for good value, sustainable products is expected to grow in the wake of the pandemic and our customer offering is well-positioned for this. Through our work to become circular and climate positive we are increasing the share of sustainable and renewable materials and we are developing new revenue streams. Together with our accelerated transformation work, this will strengthen resilience and contribute to long-term profitable growth for the H&M group.”