PARIS – As supply chain and inflation costs hit, Swedish high street retailer H&M posted barely weaker than expected sales within the three months to May 31, citing “flattish” net sales in local currencies.

Net sales looked slightly stronger in Swedish kronor, showing a 6 percent increase to 57.6 billion, or $5.36 billion at current exchange. The Swedish currency fell to its weakest level ever against the dollar and the euro in the course of the quarter.

With the U.S. dollar up around 2 percent within the period, the corporate cited the currency’s unexpected bounce back, in addition to costs of supplies and shipping, as aspects denting its recovery, despite having a success collection with the Mugler collaboration that was released May 11.

“High raw materials and freight costs and a powerful U.S. dollar had a negative impact on the result compared with the previous yr,” the corporate said in an announcement.

Sales for portfolio brands – meaning outside of its core H&M stores – were up 12 percent in local currencies, and 17 percent in Swedish kronor. The corporate operates Arket, Cos, Monki, &Other Stories and Weekday along with its flagship brand.

H&M has been concentrating on its more upmarket brands, including Cos, which it’s positioning to achieve fashion clients as demonstrated in a fashion show in Paris, and Arket, which focuses on sustainable materials and a highly curated collection.

H&M had previewed these numbers in a trading note on June 15, blaming the soft sales within the second quarter on the weather. It said summer is off to a powerful start, with sales up 10 percent in local currencies within the period of June 1 to 27.

“The summer collections have been well received and the third quarter has got off to a superb start. The conditions for increased growth in addition to profitability proceed to develop in a good direction,” said chief executive officer Helena Helmersson.

“We increased sales in lots of markets despite reduced purchasing power and unfavorable weather conditions compared with last yr,” she added.

Helmersson said the corporate is tempering costs as inflation cools. “The external aspects that affect our purchasing costs proceed to enhance,” she said.

The numbers were “barely below” analysts’ expectations, but showed promise on cost control and higher supply side pricing, said RBC Europe Limited analyst Richard Chamberlain. The positive June performance also indicated a general recovery of the apparel retail sector, said Chamberlain.

H&M shares were up 10.42 percent in morning trading.

The corporate, which implemented a price reduction plan – closing chosen stores and reducing headcount by about 1,500 jobs – decreased marketing and administrative costs by 2 percent in local currencies, though they were up in Swedish kronor to 25.58 million, or $2.3 million at current exchange.

The fee-cutting plan “is proceeding at full speed, and far of the work that now we have done in recent times is beginning to bear fruit,” Helmersson reported.

H&M can be concentrating on improving its omnichannel customer support, which can help it compete with other fast fashion high street retailers, reminiscent of Mango and Inditex’s Zara, each of which have emphasized online and offline integration in recent periods.

Gross profit within the second quarter rose to 30.38 million Swedish kronor, or $2.81 million, corresponding to a gross margin of 52.7 percent, while operating profit totaled 4.74 million Swedish kronor, or $438,568 at current exchange.

The corporate is launching a stock buyback program to buy $277.68 million value of its own shares inside the subsequent yr.

In the primary half, group net sales were up just 1 percent in local currencies, and 9 percent in Swedish kronor to 112.48 million, or $10.44 million at current exchange.

The period was impacted by “high raw materials and freight costs, a powerful U.S. dollar, increased energy costs and the results of winding down the operations in Russia.” The corporate pulled out of the territory, where it operated about 170 stores, when the country invaded Ukraine, and started wrapping up its operations there last summer.