By Dominic Chopping


STOCKHOLM--Swedish fashion retailer Hennes & Mauritz posted forecast-beating earnings as well-received spring collections pushed sales higher during February.

H&M is working through a cost and efficiency program to save 2 billion Swedish kronor ($188.8 million) a year as it works toward lowering prices for customers and achieving an operating margin of 10% this year.

It said Wednesday that benefits of the program combined with the continued normalisation of factors that influence purchasing costs as well as good-cost control is boosting margins and allowing it to enhance its product offering and provide more value for money.

"Our top priority is to strengthen sales, and our target of a 10% operating margin for full-year 2024 thus remains in place," said Chief Executive Daniel Erver.

Analysts have for some time questioned the attainability of reaching its margin target this year as the company has struggled to gain sales traction amid lower consumer buying-power, rising costs and fierce competition from low-cost, fast-fashion online rivals such as Shein and Primark as well as its larger, more traditional rival, Zara.

The Red Sea is also raising question marks, as ships are being forced to add thousands of miles to their journeys to avoid the area, slowing the delivery of goods and adding to transport costs. Unlike Zara, which has a local sourcing business model, H&M counts Asia as a major sourcing region so the Red Sea situation could be damaging to its supply chain.

In his first earnings report since taking the helm earlier this year, Erver said the company is monitoring developments in the Red Sea and acting to minimise impact on the company's product availability, freight costs and stock levels.

He also said the company is accelerating the upgrade of stores, refurbishing around 250 stores globally in 2024, and bringing more sourcing closer to its main markets.

The company said sales in the period between March 1 and March 25 increased by 2% in local currencies compared with the same period the previous year.

Net profit was 1.21 billion Swedish kronor ($114.2 million) for the quarter to Feb. 29 compared with SEK541 million a year earlier as sales fell 2.2% to SEK53.67 billion.

Analysts polled by FactSet had expected net profit of SEK753 million on sales of SEK53.25 billion.


Write to Dominic Chopping at dominic.chopping@wsj.com


(END) Dow Jones Newswires

03-27-24 0418ET