H&M swings back to profit as Covid restrictions ease, stores reopen

Fashion retailer H&M on Thursday reported a bigger than expected second quarter profit as many of the company's stores reopened but earnings remained well below pre-pandemic levels and the group's shares fell sharply.

The Swedish company, along with other big clothing chains, is trying to bounce back from the pandemic, where restrictions and lockdowns earlier this year hit the industry's sales.

"As more and more people are vaccinated and restrictions are eased, the world is gradually opening up and customers can once again visit our stores," Chief Executive Helena Helmersson said in a statement.

"Online sales have continued to develop very well even as the stores have opened," she said.

H&M said 95 of its 5,000 stores remained temporarily closed due to restrictions currently, against around 1,300 at the start of March.

The world's second-biggest fashion retailer swung to a pretax profit of 3.59 billion crowns ($419 million) in the second quarter from a year-earlier loss of 6.48 billion.

Analysts polled by Refinitiv had on average forecast a 3.42 billion crown profit.

The profit was, however, down from the corresponding quarter in 2019, when it was 5.93 billion crowns.

Sales in June 1-28, the first month of H&M's third quarter, were up 25% year-on-year measured in local currencies.

But compared with the same period in 2019, sales were down 4%, indicating that sales slowed throughout the month. H&M had said earlier that sales for the first two weeks of June were higher than in 2019.

H&M's shares were down 4% in early trade.

In China, where H&M in March was hit by a consumer boycott after comments the company made in 2020 on the Xinjiang region, local-currency sales were down 23% in the second quarter.

H&M said its board very good prospects of a dividend for 2020 in the autumn. It did not proposed one at its annual general meeting in May due to the pandemic but flagged it would probably pay one later in the year.

Retail sales in Germany, H&M's single-biggest market rebounded in May as a gradual easing of restrictions supported consumer spending, data showed on Thursday.

Also on Thursday, Associated British Foods said third-quarter sales at H&M rival Primark were ahead of expectations in all markets.

($1 = 8.5635 Swedish crowns)

(Reporting by Anna Ringstrom; editing by Niklas Pollard and Jane Merriman)