ASOMY ASOS Plc (PK)

By Dominic Chopping

STOCKHOLM--Shares in H&M and ASOS were among the biggest gainers in Europe on Thursday as investors rewarded the fashion retailers for positive trading updates.

Sweden's Hennes & Mauritz reported fiscal second-quarter sales that were just shy of expectations as cold weather dented demand, but noted a good start to June, sending shares nearly 7% higher in early trade. Meanwhile, shares in ASOS jumped by almost 16% on Thursday morning after the U.K. online fashion retailer reported a return to profitability and confirmed its guidance.

H&M had cautioned in March that the start of the spring season had been delayed in many of its important markets as a result of the weather, but noted that its collections had been well received in markets where warmer weather had arrived.

For the second quarter, which ended May 31, the Swedish fashion retailer said sales increased by 6% on year to 57.62 billion Swedish kronor ($5.38 billion), versus the SEK58.3 million expected in a FactSet analyst poll, while sales in local currencies were described as "flattish."

Although the figures are a clear lag to global peers, the update is a little less downbeat than feared and more seasonal conditions have emerged of late, leading to a good start to the third quarter, analysts at Jefferies said in a note to clients.

"We expect the market to have been anticipating a slightly more downbeat performance than sell-side consensus would suggest," they said.

The upbeat market response to H&M's update followed an even bigger move in the shares of ASOS.

The online retailer's adjusted earnings before interest and tax rose by more than 20 million pounds ($25.3 million) on year in the three months ended May 31, putting the group on track to achieve its adjusted EBIT guidance of GBP40 million to GBP60 million in the second half of the year.

Revenue dropped 11% while active customers were down by 800,000 from the end of the previous quarter, but the adjusted gross margin and profit per order both jumped higher, while cost savings are on target.

ASOS has been prioritizing its bottom-line performance over its top line, and shares have suffered steep losses over the past year since the appointment of its new CEO, down 70% until yesterday's close, Interactive Investor's head of investment, Victoria Scholar, said in a note.

"However, shares are soaring today by over 15% with traders and investors encouraged by its realignment towards profitability," she said.

In light of today's positive update, there could be some upgrades in the days ahead, Scholar adds.

At 0957 GMT H&M shares were trading 4.3% higher at SEK151.90, while ASOS shares were up 14% at 375.2 pence.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

June 15, 2023 06:17 ET (10:17 GMT)

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