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H&M returns to profit as stores reopen, but sales recovery uneven

imageStock Markets14 minutes ago (Jul 01, 2021 07:36AM ET)

(C) Reuters. Shoppers visit H&M store at Times Square in New York City, New York, U.S., May 20, 2021. REUTERS/Eduardo Munoz/Files

By Anna Ringstrom

STOCKHOLM (Reuters) -Sweden’s H&M swung back to profit in its second quarter but sales growth slowed after mid June, highlighting a patchy recovery from the pandemic as restrictions ease and stores reopen.

The world’s second-largest fashion retailer on Thursday reported a stronger than expected profit for the three months through May.

Sales for June 1-28 were up a quarter year-on-year but 4% lower than in pre-pandemic 2019.

Chief Executive Helena Helmersson, speaking to analysts and reporters, attributed the easing in the second half of the month to a combination of factors, including tough year-ago and 2019 comparisons, cold weather last week in some European markets, and how coronavirus restrictions were being eased.

“We see signals of a strong recovery also in June, and that customers appreciate our collections,” she told Reuters.

Analysts said the figures implied sales were down 9% on 2019 in the latter two weeks of June, and noted that rival Primark has also said trading was currently very volatile from week to week.

“Recent weeks of trading highlight a mixed demand rebuild,” said Jefferies (NYSE:JEF) analyst James Grzinic. H&M’s shares were down 2.4% at 1127 GMT.

Quarterly pretax profit was 3.59 billion crowns ($419 million) against a year-earlier loss of 6.48 billion.

“As more and more people are vaccinated and restrictions are eased, the world is gradually opening up and customers can once again visit our stores,” Helmersson said. “Online sales have continued to develop very well even as the stores have opened.”

H&M said 95 of its 5,000 stores globally remained temporarily closed, against 1,300 at the start of March.

CHINA SITUATION STILL ‘COMPLEX’

In China, sales were down 23% after H&M was wiped off Tmall and domestic phonemakers’ app stores in March after the retailer expressed concerns about alleged human rights abuses in Xinjiang.

Helmersson said the situation in China, which accounted for around 5% of group sales last year and is one of H&M’s two top suppliers, remained complex.

She said H&M was also closely following the situation in Bangladesh – another main sourcing market – after a spike in coronavirus cases prompted the country enforce a strict lockdown, although garment factories remain open.

“We have got used to handling situations like this,” she said. “We do think we will manage also this time.”

Chief Financial Officer Adam Karlsson said the company was not unaffected by rising freight rates due to the global shipping backlog but it had plans to mitigate them.

H&M said prospects of paying a dividend for 2020 in the autumn were now very good, after it failed to propose one at its annual general meeting in May.

Also on Thursday, Primark raised its profit outlook after store sales beat its expectations across markets.

($1 = 8.5635 Swedish crowns)

H&M returns to profit as stores reopen, but sales recovery uneven

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