H&M shares jump 8% on third-quarter sales beat as turnaround takes pace

Shares of H&M jumped on Thursday after the high street retailer posted better-than-expected results in the fiscal third quarter, and its turnaround strategy showed signs of gaining pace.

Shares were up 8.3% by 11:50 a.m. London time (6:50 a.m. ET), off earlier highs.

Operating profit at the fashion retailer rose 40% year-on-year to 4.9 billion Swedish krona ($522 million), ahead of the 3.7 billion Swedish krona forecast by analysts in an LSEG poll.

Net sales over the period, meanwhile, came in at 57 billion Swedish krona in the three months to August, versus the 56.8 billion expected.

It marks the second consecutive quarter of expectation-beating results for the Swedish retailer, as tight cost controls and a return to core product lines under CEO Daniel Erver begin to bear fruit.

H&M has, over recent years, trailed major rivals, chiefly Spanish clothing giant and Zara-owner Inditex. Erver’s overhaul strategy, however, has placed major emphasis on improving efficiencies, including via store closures and revamps, and increased digitization.

“Through a stronger customer offering, an improved gross margin and good cost control, we have strengthened operating profit,” Erver said in a statement Thursday.

The company said its autumn collections had been well received so far in September, the first month of its fiscal fourth quarter, adding that sales were expected to be on par with the same month a year earlier.

H&M nevertheless said the impact of U.S. tariffs on imports was likely to become “fully loaded” by the late fourth quarter and early first quarter of next year.

This could result in price increases in the U.S., Erver said, but added that the business would take a “prudent” approach to pricing, only raising them where consumers were willing to pay more, amid weaker consumer sentiment.