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FILE PHOTO: The logo of H&M is seen in a display window of a store in Zurich, Switzerland January 7, 2019. Picture taken January 7, 2019. REUTERS/Arnd Wiegmann.
STOCKHOLM - Swedish fashion retailer H&M reported a slightly stronger second-quarter profit on Thursday, an encouraging sign as CEO Daniel Erver tries to reboot the brand and improve profitability.
H&M shares were up 4% at the open as investors focused on the profit rather than second-quarter sales, which fell slightly more than predicted. Erver has said his focus is on profitability rather than solely sales growth.
The world's second-largest listed fashion retailer said it expected sales in June, measured in local currencies, to rise 3% - an improvement after a 6% fall a year ago in the same period.
"Our plan, with its focus on the product offering, the shopping experience and brand, is again confirmed by the progress we see," Erver said in a statement, adding however that these are "uncertain times with cautious consumers".
In the March-May period, H&M's sales were 56.7 billion Swedish crowns ($5.99 billion), down from 59.6 billion a year ago. Analysts polled by LSEG had forecast revenue of 57.0 billion crowns.
Zara owner Inditex earlier this month also reported disappointing sales, in a sign consumers are pulling back from spending on clothes as U.S. tariffs create risks for global economic growth.
H&M's second-quarter operating profit was 5.91 billion, beating analysts' forecast of 5.88 billion, and the operating profit margin was 11.9%, up from 8.2% a year ago.
"The slightly better than expected margin delivery sends a positive signal to the market," said Alphavalue analyst Jie Zhang.
However, H&M flagged more discounting in the third quarter.
Retailers are navigating Trump's rapidly shifting tariff announcements as concerns grow about resurgent inflation.
H&M is "monitoring" global trade developments, it said in the statement, and can adapt by changing its supply chain and its pricing.
($1 = 9.4635 Swedish crowns)
(Reporting by Greta Rosen Fondahn and Helen Reid, editing by Anna Ringstrom and David Evans)