H&M share soars as earnings beat expectations

Shares in H&M surged yesterday as the Swedish clothing giant reported better-than-expected earnings for its second quarter.

H&M reported a net profit of 3.29 billion kronor ($305 million) for the March-to-May period.

It was down from 3.68 billion kronor the year before but above expectations of 2.84 billion kronor in a Bloomberg survey of analysts.

Around midday H&M shares were up over 11 percent on the Stockholm stock exchange.

"The summer collections have been well received and the third quarter has got off to a good start. The conditions for increased growth as well as profitability continue to develop in a favorable direction," CEO Helena Helmersson said in a comment.

The company also reported a near 5 percent drop in operating profit to 4.74 billion kronor, but this was also better than analysts' expectations of 4.26 billion kronor.

H&M noted in its report that the operating profit "was negatively impacted as a result of increased raw materials and freight costs combined with a stronger U.S. dollar compared with last year."

The company also reported a 20 percent reduction of its inventory on hand and said it was on course to further reduce its stocks of unsold clothes.

H&M said it planned to open around 100 new stores, while closing around 200.

At the end of May the global retailer had 4,399 stores around the world, a reduction of 303 stores compared to a year earlier.