Despite blaming abnormally hot weather in many of its European regions for delaying the autumn shopping season, apparel giant H&M announced a pick-up in quarterly profit margins on Wednesday, increasing optimism about its turnaround efforts.

Inditex, the company that owns Zara, is H&M’s main competitor. Inditex predicted that September sales would be down 10% locally-priced year over year.

“It’s clear that more heavy autumn product types are the ones where we see a delay in selling,” H&M CEO Helena Helmersson said in an interview, adding: “We know that we can’t draw big conclusions after one month.”

According to her, some of the most popular trends so far this season include tailored suits, denim, fine knits, and blouses.

In contrast to Inditex’s report of a 14% gain in sales between August 1 and September 11, the projected dip in sales is expected.

“If the sales at your competitor basically go up by 14% with the same weather, that tells you something, to my mind,” said Vera Diehl, portfolio manager at Union Investment, which holds shares in H&M and Inditex.

H&M maintained its objective of increasing its operating margin to 10% next year, and its shares increased 3.7% as a result. The business also stated that its cost-cutting initiative was still going “at full speed.”

H&M’s margin increased to 8% in the third quarter from 2% a year earlier as the retailer emphasised profitability and inventory management over sales, according to the retailer. The 10% goal is “challenging but doable,” according to Nicolas Champ, a Barclays analyst.

The Swedish group’s operating profit increased significantly from 902 million in the year-ago third quarter to 4.74 billion crowns ($431 million). A 4.72 billion crown profit was the average prediction of the analysts LSEG surveyed.

For the group’s exit from Russia, which also accounted for four percentage points of the 10% September sales decrease, the number for last year included a one-time cost of 2.1 billion crowns.

Adam Karlsson, chief financial officer of H&M, said he anticipated price reductions as cost pressures eased, although he did not specify when.

According to Karlsson, shoplifting has climbed over the last two quarters, adding to a growing list of businesses that have noted an increase in crime, particularly in Britain and the US.

In an indication that the company is regaining its footing after facing backlash for its stance on alleged human rights violations in the Xinjiang area, H&M launched on JD.com this month in China.

Last year, it made a comeback on Alibaba’s Tmall e-commerce portal.

The launch on JD.com, according to Helmersson, was a significant step, but H&M was still “not where it wants to be” in China.

The corporation said on Wednesday that it would begin a share repurchase scheme, with a goal of repurchasing up to 3 billion crowns’ worth of stock by March 31 of the next year.

(Adapted from Investing.com)

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