H&M beats expectations in second quarter but inflation risks loom

Swedish fashion retail giant H&M beat analysts' expectations in the second quarter and reported that supply chain woes were finally beginning to recede.
H&M said Wednesday that its second-quarter profit after tax increased to 3.68 billion Swedish kronor ($362 million) from last year's 2.77 billion kronor.
Operating profit was 4.99 billion kronor, corresponding to an operating margin of 9.2%, higher than the prior year's 3.85 billion kronor or 8.3% margin.
Net sales increased 17% to 54.50 billion kronor from 46.51 billion kronor last year.
One concern, however, is the high inflation that has taken hold in markets around the world, which could result in consumers spending less on clothing going forward.
As in the previous quarter, H&M said it was benefiting from a strong recovery from the coronavirus pandemic, which had weighed heavily on business at this time a year ago.
This low-base effect, which has boosted year-on-year comparisons, will now begin began to expire as demand normalizes.
In June, for example, H&M anticipates a 6% decline in sales adjusted for currency effects compared to the very strong previous year. Much of the blame for this was attributed to the suspension of business in Belarus, Russia and Ukraine.