Hennes & Mauritz AB (H&M) reported second-quarter earnings that beat analysts’ estimates as shoppers snapped up its low-cost clothing to replenish post-Covid wardrobes.

Pretax profit at the Swedish low-cost retailer rose by a third to 4.78 billion kronor ($470 million) in the three months through May, the company said Wednesday. Analysts had expected 3.98 billion kronor. Still, H&M said sales could fall 6 percent in June as the war in Ukraine weighs.

“Well-received collections have led to strong development, with a further increase in full-price sales and decrease in markdowns,” chief executive Helena Helmersson said in a statement.

The shares rose as much as 4.7 percent in Stockholm, before paring the gains.

H&M and rival brick-and-mortar retailers have seen a rebound in sales as consumers refresh wardrobes for work and special events after two years spent mostly stuck at home. That said, rising prices for everything from energy to transport and food are stretching shoppers’ budgets and sapping confidence. Soaring costs are also squeezing margins for some retailers.

The war in Ukraine and sporadic lockdowns in parts of China, where H&M has been the subject of a boycott related to its refusal to use cotton from the Xinjiang region, aren’t helping. The company is closing a flagship store in Shanghai, while in Russia it paused sales following the invasion.

H&M said it’s looking at ways to “prioritize initiatives, redistribute resources and ensure continued good profitability” as a direct consequence of the challenges it faces.

Warnings from analysts that H&M will see a hit to its profitability have contributed to a more than 30% drop in the share price this year. The company’s stated ambition is to strengthen its market position by raising prices less than competitors.

By Rafaela Lindeberg

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