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H&M reinstates dividend as profit beats pre-pandemic level

·2-min read
HONG KONG, CHINA - 2021/08/07: Pedestrians cross the street in front of the Swedish multinational clothing design retail company Hennes & Mauritz, H&M, store in Hong Kong. (Photo by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)
The group announced that 50 of its 5,000 stores currently remained temporarily closed. (Photo:Getty Images)

Swedish retailer Hennes & Mauritz (HM-B.ST) has reinstated its dividend after profits beat expectations and topped pre-pandemic levels.

The clothing chain, which is the second-biggest in the world, posted a 158% surge in pre-tax profit in its third quarter to 6.09bn kr (£512m, $690m).

This was a 22% rise compared to the same quarter in 2019, before the start of the health crisis. It cited more full-price sales, lower markdowns and good cost control as the drivers of the strong performance.

The group added that around 50 of its 5,000 stores currently remained temporarily closed, compared to 180 at the start of June.

H&M proposed paying a dividend for 2020 in November, 18 months after suspending it, of 6.50 kr per share.

H&M shares were slightly down on Thursday. Chart: Yahoo Finance
H&M shares were slightly down on Thursday. Chart: Yahoo Finance

However, supply disruptions have put a restraint on September sales, the company said on Thursday, with shortages of goods, as well as containers, storage and drivers.

H&M said this has led to a sharp increase in shipping costs, with bottlenecks affecting the firm mainly in production, transport and ports. Prices for cotton have also risen due to strong Chinese demand.

"Sales in September 2021 were slightly higher than in the corresponding month the previous year in local currencies, even though demand was not able to be fully met because of disruption and delays in product flow," H&M said.

It expects more delivery delays in the current quarter.

Read more: UK service sector growth slows amid staff shortages and supply chain disruption

Increased consumer spending after the first wave of COVID-19 in Europe, the US and Asia benefited the company, however, it has lagged behind Inditex, the Spanish owner of Zara, which is the world’s biggest clothing retailer.

Earlier this month, Inditex said sales accelerated in the May to July period to €6.99bn (£6.02bn, $8.1bn), which was 7% higher than in the same period in 2019, as shoppers started buying clothes again for summer social events.

Watch: H&M profits jump to pre-crisis levels

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