Hennes & Mauritz reported a 40% jump in third-quarter operating profit, a sign that the Swedish fashion retailer's turnaround strategy of improving profitability and controlling costs is gaining traction.
Operating profit for the three months through August rose to 4.91 billion Swedish kronor from 3.51 billion kronor a year earlier, the company said Thursday.
The operating margin widened to 8.6% from 5.9% in the same period last year.
Sales in local currencies increased by 2%, achieved despite operating 4% fewer stores than a year ago.
Reported net sales, however, fell to 57.02 billion kronor from 59.01 billion kronor, which the company attributed to negative currency translation effects.
H&M also successfully reduced its inventory by 9% to 37.94 billion kronor, improving a key metric for the fast-fashion industry.
“We are taking further steps in the right direction. Through a stronger customer offering, an improved gross margin and good cost control, we have strengthened operating profit by 40 percent compared with the same quarter last year while also having reduced the stock-in-trade,” said CEO Daniel Ervér.
The company noted its autumn collections have been well received and that it successfully launched its first store and online presence in Brazil at the end of August.
For September, H&M expects sales in local currencies to be on par with the high comparative figures from the previous year.
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Hennes & Mauritz reported a drop in second-quarter profit, citing higher purchasing costs and unfavorable currency movements, but said it expects these headwinds to reverse in the second half of the year.