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H&M shares climb on sales growth, despite pre-tax profit loss

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H&M shares have gained over 10% Thursday, after the Swedish fashion retailer announced a 3% increase in total sales in the nine months to August, boosted by a 32% rise in third quarter online sales revenues.

However, the fast fashion firm also reported a drop in pre-tax profits, which was weighed down by additional costs associated with the new logistics system being rolled out across the business.

By around 1330 BST, H&M shares were 10.09% higher at SEK163.46. The stock has been upbeat in recent weeks.

H&M 9-month sales report

H&M’s 9-month sales report published earlier Thursday, showed the fashion retailer’s sales grew 3%. However, profits fell to SEK11.3 billion, down from SEK16 billion a year earlier.

In addition, the fast-fashion retailer said that its revenues surged 9%, boosted by online sales growth of around one third, compared with the third quarter of 2017.

But again, profits were lower, totalling SEK4.01 billion, down from SEK5.01 billion a year ago.

“The rapid changes in the fashion industry are continuing and the H&M group is in an exciting transitional period,” said H&M CEO, Karl-Johan Persson.

“Our transformation work has contributed to a gradual improvement in sales development with increased market share in most markets during the third quarter, particularly in Germany, Sweden, Eastern Europe, Russia and China,” Persson said.

Costly logistics roll-out

Persson also detailed the main reason behind the drop in profits – an additional, extraordinary SEK400 million cost associated with the roll-out of its new, business-wide logistics system.

“In the US, France, Italy and Belgium, however, store sales were negatively impacted by the problems that arose when we introduced new logistics systems in these markets,” Persson said.

“Intensive work to correct the problems – which have now largely been resolved – resulted in extraordinary costs of around SEK 400 million in the quarter. The new logistics systems are an essential part of our work to make our supply chain faster, more flexible and more efficient, and to continue the integration of stores and online,” the CEO added.

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