H&M recovery gathers pace as online growth and fewer discounts boost profits

H&M’s recovery gathered pace in the third quarter as profits jumped after the fashion retailer sharpened its online presence.

The Swedish company hailed an upbeat set of results which it said was also driven by a reduction in heavy discounting.

Pre-tax profits jumped 25% to 5 billion Swedish krona (£411 million) in the three months to August, pushing ahead of analysts’ forecasts.

Profitability improved on the back of a 12% jump in group sales for the quarter to 62.5 billion Swedish krona (£5.1 billion).

Sales growth was driven by 27% growth in the US, its second largest market, while UK sales rose by a more modest 3% to 3.8 billion krona (£312 million).

The company was also heavily boosted by a 30% jump in online sales, as it invested more money into improving its digital proposition to take on rivals such as Asos.

After coming under pressure from rival retailers, particularly Zara-owner Inditex, H&M has started a recovery strategy focused on reducing inventory levels and discounting.

However, the retailer said it expects 120 net store openings by the end of 2019, falling short of previous expectations.

H&M added that its has made a “promising start” to the new season, with a “positive reception” from customers to its early autumn collections.

Chief executive Karl-Johan Persson said: “Well-received summer collections and increased market share show that we are on the right track with our transformation work to meet customers’ ever-increasing expectations.

“Looking ahead, we remain humble considering the challenges brought by the rapid shift in fashion retail. Our transformation work is therefore continuing at a fast pace in all parts of the company.

“We are convinced that this will contribute to positive development for the H&M group for many years to come.”

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