Shares of Hennes & Mauritz, better known as H&M, jumped by more than 15% during Wednesday trading after the company reported better-than-expected first quarter results.
The stock’s rally was in part buoyed by a boost in profits and plans to increase its operating margin rate for the fiscal 2024 year, which surpassed Wall Street’s profit expectations.
For the period, the Swedish retailer and one of the first generation of “fast fashion” brands reported operating profit of 2.08 billion Swedish Krona (~$196 million). Analysts forecasted the company would generate 1.43 billion Swedish Krona (~$134.6 million).
H&M said it is also increasing its operating margin, setting a new target rate for the fiscal 2024 year of 10%. For the period, the retailer said its operating margin rose from 1.3% to 3.9%.
The retailer likened the change to an improvement in purchasing costs with its suppliers and better cost control, which have given the company room to enhance its product offering and provide consumers with better value.
H&M’s glimmer of light comes at time when the retailer has been forced to deal with a number of macro factors, including persistent inflation, which has kept consumers from spending on non-essential goods, such as clothing and accessories.
Moreover, in late March, militant attacks in the Suez Canal area of the Red Sea prompted H&M to hold off on launching its Spring/Summer campaigns as container vessel companies were forced to re-route, leading to significant delays in Europe for clothing and apparel.
That hasn’t deterred some shoppers from making their way to an H&M store or its online marketplace to spruce up their spring looks.
Although overall sales for the quarter were down 2%, the retailer saw consumers in regions like Eastern Europe buy more.
“Quarter’s sales gradually improved during February with well-received Spring collections,” Daniel Ervér, H&M’s CEO, said, adding that it is a “positive sign that we are on the right track.”