Charter Communications earnings missed by $0.40, revenue was in line with estimates
Investing.com -- H&M (ST:HMb) shares jumped more than 6% on Thursday after the Swedish fashion retailer posted second-quarter results that, while showing a decline in profit, still came in better than many had feared.
The company has been facing multiple pressures, from a stronger Swedish krona that hurt international earnings to increased purchasing costs, but cost management and steady local-currency sales helped soften the blow.
The company also launched a SEK 175 million share buyback, set to run from June 26 to July 17, covering up to 1.1 million Class B shares.
For the three months ending May 31, H&M posted a net profit of SEK 3.96 billion, down from SEK 5.06 billion a year earlier.
Operating profit fell to SEK 5.91 billion from SEK 7.10 billion, though this represented a 6% beat versus consensus estimates of SEK 5.56 billion. The operating margin narrowed to 10.4% from 11.9%.
Net sales declined 5% to SEK 56.71 billion, largely due to a 6 percentage-point negative currency translation from a stronger Swedish krona.
In local currencies, sales rose 1%, and were up 3% when adjusted for store closures. Gross profit dropped to SEK 31.43 billion from SEK 33.57 billion, with the gross margin slipping to 55.4% from 56.3%. Earnings per share declined to SEK 2.48 from SEK 3.15.
H&M continued to manage expenses tightly, with selling and administrative costs falling to SEK 25.49 billion from SEK 26.45 billion.
According to analysts at Jefferies, the 17% decline in EBIT was expected but the margin performance and cost discipline were stronger than feared.
Online sales accounted for just over 30% of revenue. Portfolio brands rose 3% in local currencies but declined 2% in Swedish krona terms.
For the six months ended May 31, net sales totaled SEK 112.05 billion, down slightly from SEK 113.27 billion, with local-currency sales up 1%.
Operating profit dropped to SEK 7.12 billion from SEK 9.18 billion, and net profit declined to SEK 4.54 billion from SEK 6.30 billion.
EPS for the half-year fell to SEK 2.85 from SEK 3.91. The gross margin for the period stood at 52.3%, down from 54%.
Cash flow from operations fell to SEK 12.73 billion from SEK 16.57 billion, impacted by lower profits and higher tax outflows.
H&M maintained strong liquidity with SEK 16.23 billion in cash and SEK 19.57 billion in undrawn credit, giving total available liquidity of SEK 35.83 billion.
Inventory increased 1% year-over-year to SEK 38.82 billion, attributed to higher purchasing costs, though inventory volume declined. This represents 16.6% of trailing 12-month sales.
H&M operated 4,166 stores at quarter-end, 153 fewer than a year ago. In the first half, a net 87 stores were closed.
For 2025, it plans to open 80 new stores and close over 200, mostly in established markets. The company will enter Brazil, El Salvador, and Venezuela later this year.
June sales are expected to rise 3% in local currencies. However, H&M warned that markdown costs will increase in the third quarter, potentially affecting margins.