Unexpected profits for fashion store, H&M Hennes & Mauritz, in its first quarter sent its share price soaring by more than 16% on Thursday.
The Swedish retailer reported a 58% uptick in underlying profits for the 3 months that ended on 28 February.
Profits reached SKr725mln (£56.6mln), with an operating margin of 1.3% - still a way behind the 10% margin forecast for next year.
“Despite the backdrop of rampant inflation, cost-of-living crises in many of its major markets, a softening consumer, and its exit from Russia, H&M’s workforce reduction and cost-cutting strategy have boosted its bottom line,” said Victoria Scholar at Interactive Investor.
However, analysts at Jefferies have warned that this growth – largely boosted by a better-than-expected gross margin of 47% - may not continue going forward.
In March, organic growth came in at 4% year-on-year compared to the first quarter's 7% rise, the US bank stated.
“This remains shy of sell-side expectations and well below peers,” Jefferies added.
The bank rate the stock a ‘hold’ and a price target of SKr115 around 6% less than the current share price.
“The group guides to gradually improving purchasing conditions from Q2, but the wording from the trading update seems to suggest ongoing gross margin declines in the current quarter,” said Jefferies.
Weekly retail footfall in the week of 26 March was 20% lower than in the same period in 2019.
Still, retailers appear to still be recovering, with UK shopping footfall rising monthly in February according to Springboard data.
The high-street shop and its rival Next have both witnessed a boost in share price in 2023, up 23% and 9% respectively.
However, this performance pales in comparison to around the 50% rise shares in online retailers Boohoo and ASOS have seen year-to-date.
(12.80 SKr = £1)