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H&M's Sales Are Doing Really Well — Even Better Than Expected

The Swedish retail giant surprised itself with a 10 percent profit boost in its second quarter, as compared to the same period last year.
An H&M store in Berlin. Photo: Sean Gallup/Getty Images

An H&M store in Berlin. Photo: Sean Gallup/Getty Images

Last we checked in on H&M's business, the Swedish mega-retailer had just bitten the proverbial fashion bullet and switched over to an instantly shoppable, "see now, buy now" presentation format. This move came on the heels of a knockout year for the brand: Earlier this spring, it announced its plans to launch a new brand called Arket, and in February, tapped Natalia Vodianova to front its new Conscious Exclusive collection; meanwhile, last November, its collaboration with Kenzo debuted — and sold out — to critical acclaim. From an outsider's perspective, H&M has been doing just about everything right, and on Thursday, it reported the sales figures to prove it.

In its second quarter spanning March 1-May 31, H&M — the second-largest fashion retailer after Zara — saw its profits grow 10 percent to 7.71 billion Swedish crowns (about $9.08 billion), surpassing expectations, from the same period last year. In an earnings report, H&M attributed this lift to "continued expansion and tight cost control," with the latter being especially prevalent. 

During a time when many more retailers are shuttering their brick-and-mortar properties than opening them, H&M saw "successful" store openings this period in new markets like Kazakhstan and Colombia, soon to be followed by locations in Iceland, Vietnam and Georgia, the country. Its online store also explored six new regions — Turkey, Taiwan, Hong Kong, Macau, Singapore and Malaysia – and is now available in 41 total markets; it will open in two further areas — the Philippines and Cyprus — this year. Certain markets did pose a challenge, however: H&M reported that the second quarter was trying for China, the Netherlands and Switzerland, as well as the U.S.

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H&M's widespread sales growth also extended into this offshoot brands — including COS, & Other Stories, Monki, Weekday and H&M Home — which "remained very strong, both in stores and online." CEO Karl-Johan Persson emphasized that this will be an sector in which the company will company to invest going forward. He offers up COS as an example, which will reach revenues of around SEK 10 billion this year with profitability in line with that of the H&M brand. "The value of COS today already far exceeds the amount we invested in it and this is just the beginning of the journey," he said.

So, where does H&M go from here? To just keep climbing, I guess; the company expects for its online sales to increase by at least 25 percent per year, with similar profitability in its physical stores. If the retailer wants to share its secrets with any number of the fledgling apparel brands out there, I'm sure any recommendations would be welcome.

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