H&M profit gets Q1 Sellpy boost, says womenswear, COS and Arket are strong

By

Sandra Halliday

Published
Mar 30, 2023

​H&M’s Q1 results on Thursday showed the company increasing operating profit, net profit and sales in the three months to the end of February. But challenges remain and many spring season sales have been delayed by cold weather.

Operating profit rose to SEK725 million (€65m/£58m/£69m) from SEK458 million, corresponding to an operating margin of 1.3%, up from 0.9%. It had been expected to make a loss, but a positive effect relating to Sellpy (one of Europe’s largest secondhand platforms that was previously an associated company and is now being consolidated into the group) was included at SEK999 million.

The company had previously flagged its sales figures for the quarter with net sales up 12% to SEK54.87 billion and up 3% in local currencies. Excluding Russia, Belarus and Ukraine the increase was 16% in SEK and 7% in local currencies.

But the gross margin fell to 47.2% from 49.3% with the company saying the “external factors for purchases made for the first quarter were very negative compared with the corresponding period last year”.

It’s interesting that the company doesn’t always break out sales for Portfolio Brands (COS, Monki, Weekday, & Other Stories and Arket)  separately. But it said that in the first quarter, they increased by 19% in SEK and by 11% in local currencies.

It said these brands “have developed strongly and are making an increasingly important contribution to the group’s growth. COS has carried out an extensive upgrade of its assortment and strengthened its positioning in the premium segment. Arket continues to grow at a fast pace and has tripled its sales since 2019”.

The company added that for Q2 so far (the month of March), sales in local currencies are expected to increase by 4%. “The start of the spring season has been delayed in many important markets as a result of cold weather,” H&M said, but it added that the “spring collections have been well received where the weather has warmed up”.

It also trumpeted that in a recent report by environmental and climate organisation Stand.earth the group was ranked highest for its climate actions out of a total of 43 fashion brands.

CEO Helena Helmersson said: “The H&M group continues to stand strong with a robust financial position, stable cash flow and a well-balanced inventory. The start of the year shows that we have taken further steps towards the goal of achieving an operating margin of 10% already next year.”

She added that the backdrop remains challenging, but “we are seeing several areas where developments are going in the right direction. The external factors that influence purchasing costs continue to improve, work on the cost and efficiency programme is proceeding at full speed, and many of the changes that we have made in recent years are starting to have an effect”.

And as well as the collections being received well for spring so far, the group is “continuing with a number of initiatives aimed at offering our customers even more value. Thanks to our investments in areas such as tech, AI and the supply chain, we have improved precision and faster response times – giving our customers access to an even wider and more relevant assortment that is adjusted to regions, stores and online”.

This is showing particularly strongly within H&M womenswear, “which is attracting more and more customers”.