H&M shares surge on fewer fashion markdowns
Shares in H&M surged after the ailing Swedish clothing retailer reported first-quarter profits that beat expectations on lower clearance sales.
The shares rose as much as 16% after the company pulled back on discounts, compared with the fire sale it held a year earlier. The gains may have been spurred by “short squeezes”, when a bit of good news spurs investors who have bet against the stock to rush to reverse positions. The shares have still lost more than half their value since their 2015 peak.
The company showed some signs of coming to grips with increased competition from online retailers like Zalando and low-price competitors including Primark-Penneys. Until now its efforts have been plagued by logistics and distribution mishaps, fashion misjudgments, and weak sales in physical stores. H&M has been introducing garments at lower prices to try to avoid massive discounts later.
“It’s still a shaky market,” said chief executive Karl-Johan Persson. “We’re still in a transition period, but we believe in gradual improvement.”
Sales growth accelerated so far in the second quarter, rising 7% in local currencies in March compared to 4% in the first quarter. The Stockholm-based company said it expects markdowns to be even less significant in the three months through May.
However, the amount of unsold products is building up again. The CEO also said the unsold garments have a better composition as they’re mostly garments that the retailer can sell in spring and summer.
H&M plans to reduce its store count in Europe by 50 shops this year, and Mr Persson said the retailer will probably keep retrenching in Europe until 2025.
