Marie Mannes and Helen Reed
STOCKHOLM (Reuters) – H&M, the world’s second-largest fashion retailer, beat expectations for first-quarter operating profit on Wednesday as new CEO Daniel Erver said its spring collections were well received and sales showed signs of recovery.
Shares in the Swedish group rose 12% in early trading after it reported an operating profit of 2.08 billion crowns ($196 million), compared with 725 million and above the 1.43 billion expected by analysts in an LSEG survey.
The 2% drop in sales in the first quarter was less than analysts had expected, but sales rose 2% at the start of the second quarter, reflecting stronger demand for apparel and accessories.
“Sales for the quarter gradually improved through February on the back of well-received spring collections, which is a positive sign that we are on the right track,” said CEO Daniel Erver, who has been in the role for two months.
“Our top priority is to increase sales,” he added, also repeating H&M’s (ST:) goal of achieving 10% operating profit this year.
The retailer, known for $19.99 jeans and dresses under $15, has begun offering higher-end clothing, selling leather pants for more than $300 and, under its Cos brand, coats for $1,190.
Online fast-fashion retailer Shein, which sells $8 dresses, $5 T-shirts and $2 jewelry, has taken share of the lower end of the market from H&M, while larger rival Zara has expanded its dominance in the sector.
In an effort to improve the in-store experience, H&M said it was renovating around 250 stores this year, a “significant increase” from last year. It plans to open about 100 stores, mostly in emerging markets, and close 160 stores in more established markets.