STOCKHOLM (Reuters) -Swedish fashion group H&M reported on Thursday a substantially bigger rise than expected in third-quarter profit as shoppers took to autumn styles, but warned of higher tariff related costs in the current quarter.
The world’s second-largest listed apparel retailer predicted the cost of tariffs on imports would have a bigger impact on gross margin in the three months through November.
H&M is trying to boost profitability and attract shoppers through trendier clothes to compete with Shein and Inditex’ Zara, while U.S. tariffs disrupt the fast-fashion industry.
“The autumn collections have been well received,” H&M said in a statement.
Following two consecutive fiscal quarters of falling earnings, June-August operating profit was 4.91 billion crowns ($523 million) against a year-earlier 3.51 billion and a mean forecast in an LSEG poll of analysts of 3.68 billion, on sales growth measured in local currencies of 2%.
H&M said it expected local-currency sales in September to be flat compared with a high year-ago figure.
It said markdowns in the third quarter were marginally bigger than a year earlier, and that it expects them to be somewhat higher in the fourth quarter, partly because Black Friday falls one day earlier.
In reported currency, sales fell in the third quarter, to 57.0 billion crowns from 59.0 billion against an expected 56.8 billion.
($1 = 9.3940 Swedish crowns)
(Reporting by Greta Rosen Fondahn and Helen Reid, editing by Anna Ringstrom)
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