H&M surged 10% as the company’s financial results exceeded expectations for two consecutive quarters.

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H&M has delivered a strong third-quarter report. Thanks to effective cost control and sales momentum, the company’s profits have exceeded market expectations for the second consecutive quarter.

On Thursday, September 25, Swedish fast fashion retailer H&M announced its financial report for the third quarter ending in August. The report shows that the company’s Q3 net sales amounted to SEK 57 billion, with operating profit reaching SEK 4.9 billion, far surpassing analysts’ expectations of SEK 3.7 billion. The gross margin was 52.9%, and the operating margin was 8.6%.

According to the report, the better-than-expected profit growth was mainly due to improved customer service, higher gross margin, and effective cost control. These measures offset some of the negative impact of macroeconomic uncertainties and trade barriers, and helped attract consumers back to both online and offline stores.

Looking ahead, H&M expects its sales for the first month of the fourth quarter (September) to be flat year-on-year. The company noted that this is a particularly challenging comparison, as last September’s sales had jumped 11% driven by cooler weather and the launch of a new brand positioning. At the same time, the company stated that its autumn collection has been well received by the market.

After the financial report was released, H&M’s European stock jumped more than 10%, but has since pulled back somewhat.

Cost Control and Brand Repositioning Taking Effect

The reasons behind H&M’s better-than-expected profits lie in the dual success of cost control and strategic brand adjustments.

The financial report shows that over the past year, the company has increased its advertising efforts and refocused on its core H&M brand, a strategy that has successfully drawn back consumers. In addition to marketing efforts, more streamlined inventory management and favorable early autumn weather also contributed to the business results.

This is the second consecutive quarter that H&M has outperformed external expectations, further proving the effectiveness of its new strategy. The market believes that the strategy led by CEO Daniel Erver seems to be steering the company toward a more sustained recovery.

It is worth noting that H&M’s major competitor, Inditex—the parent company of Zara—also delivered positive signals for the industry earlier this month, as its autumn sales got off to a stronger-than-expected start.

For a long time, this Spanish giant has outpaced H&M in growth, thanks to its leaner supply chain and faster fashion cycles.

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