Swedish fashion retailer H&M (HMb.ST) reported slightly stronger second-quarter profit on Thursday, an encouraging sign as CEO Daniel Erver tries to reboot the brand and lure more shoppers in with trendier clothes.
H&M shares gained 7.5% in early trading as investors focused on the profit rather than second-quarter sales, which fell slightly more than predicted. Erver has said his focus is on profitability rather than solely sales growth.
The world's second-largest listed fashion retailer also said it expected sales in June, measured in local currencies, to rise 3% - an improvement after a 6% fall in the same period a year ago.
"Our collections are more current, they are more on trend, more fashionable, and the customer reception has been strong throughout this quarter," Erver said in a press conference.
U.S. tariffs have caused "a very turbulent situation", Erver added, saying competitors had raised prices in the U.S. as a result.
H&M is focused on keeping prices competitive, Erver said, as consumers are particularly price-sensitive given uncertainty around the global economy.
In the March to May period, H&M's sales were 56.7 billion Swedish crowns ($5.99 billion), down from 59.6 billion a year ago. Analysts polled by LSEG had forecast revenue of 57.0 billion crowns.
Zara owner Inditex (ITX.MC) earlier this month also reported disappointing sales, in a sign consumers are pulling back from spending on clothes as U.S. tariffs create risks for global economic growth.
H&M's second-quarter operating profit was 5.91 billion, beating analysts' forecast of 5.88 billion, and the operating profit margin was 11.9%, up from 8.2% a year ago.
"The slightly better than expected margin delivery sends a positive signal to the market," said Alphavalue analyst Jie Zhang.
However, H&M flagged more discounting in the third quarter.
H&M is "monitoring" global trade developments, it said in the statement, and can adapt by changing its supply chain and its pricing.
($1 = 9.4635 Swedish crowns)
