STOCKHOLM (Reuters) – H&M, the world’s second-biggest fashion retailer, reported operating profit for the December-February period on Thursday as analysts expected a loss as consumers cut spending in a context of galloping inflation.

The operating profit for the first fiscal quarter of the Swedish group amounted to 725 million Swedish crowns (64.36 million euros), against a profit of 458 million a year earlier. Analysts had expected a loss of 1.10 billion Swedish kronor, according to Refinitiv data.

Despite keeping costs under control, H&M still has difficulty competing with its main competitor Inditex, owner of Zara and other brands, as well as with rapidly expanding “fast-fashion” online retailers, such as SHEIN and Temu.

“The external factors that influence purchasing costs continue to improve, work on the cost and efficiency program continues at full speed and many of the changes we have made in recent years are starting to take effect. “Helena Helmersson, chief executive, said in a statement.

H&M’s first-quarter revenue, released separately on March 15, fell short of expectations as the weak sales increase fell short of most estimates, analysts said.

H&M anticipates a 4% increase in local currency in net sales for the month of March compared to the same period last year.

H&M stock rose 9.5% in 2023 on the Stockholm Stock Exchange, compared to a 19.7% rise for Inditex. The Swedish group’s share price closed at 122.86 crowns on Wednesday, just a third of its all-time high of 368.5 crowns from 2015.

(Report Marie Mannes, Gaëlle Sheehan, edited by Kate Entringer)

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