H&M Draws In Returning Shoppers, Beats Market Expectations

Words by Retail Bum

H&M Draws In Returning Shoppers, Beats Market Expectations
H&M Draws In Returning Shoppers, Beats Market Expectations
Swedish fashion retailer H&M reported a larger than expected rise in sales, benefitting from a rebound in consumer demand.

The company’s net sales were up 17% year-on-year, reaching $5.4 billion in Q2, which was higher than the $5.1 billion analysts’ estimated. Still, the company’s turnover was below pre-pandemic levels observed in Q2 2019, when the company reported $5.6 billion in net sales.

“Whilst in a less spectacular manner than Inditex last week, H&M also confirms today that the reopening process in Europe has led to strong demand conditions persisting in recent weeks,” said analysts at Jefferies.

“Investors will be keen to better understand the extent to which price recovery is offsetting mounting input pressures and rebuilding costs,” they said.

That being said, the growth in sales that H&M and its rival Inditex are enjoying could be short-lived as consumer sentiment continues to fall with rising inflation and interest rates.

“Whilst the top-line improvement is encouraging, we are mindful that strength in clothing trends over summer could be short-lived as the consumer environment weakens,” JPMorgan analysts said.

“We note that Nordics sports retailer XXL profit warned on Q2 yesterday evening and that this followed a warning last week from online clothing pure-play Boozt, with both citing weakening consumer sentiment,” they added.

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