Hennes & Mauritz reported a 1.5% drop in second-quarter profit after tax, noting intensified investments in the company overhaul weighed on results.
“As customer satisfaction and sales increase, the group has intensified its transformation work even further, which had a dampening effect on earnings development,” the company said in a statement Thursday.
Sales for the month of June have risen 12% at constant rates, according to the fast-fashion retailer. The group said it continues to bulk up the proportion of full-price goods for sale, and it projected a 1.5 percentage point decrease in the cost of markdowns in relation to sales over the third quarter — which would be the fourth successive quarter marking a reduction in markdowns.
Many operators in the lower-priced segment, including H&M last year, get caught up in a spiral of discounting, while Spanish rival, Inditex, the owner of Zara, has been focusing on improving margins by beefing up sale of full-priced goods.
Profit after tax came to 4.57 billion Swedish kronor, or $490 million, for the three months ended May 31.
H&M previously reported an 11% rise in sales over the second quarter, lifted by a currency boost, and said that it needs to continue working hard to revamp operations to match shifting consumption habits.
Sales for the three months ended May 31 were 57.47 billion Swedish kronor, or $6.05 billion, representing a 6% rise in local currency terms.
This story was reported by WWD and originally appeared on WWD.com.
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