A pickup in H&M’s revenue growth at the start of the third quarter, helped by a heat wave in Europe, is boosting optimism that the retailer may have returned to a level of sales growth that could gradually put the inventory issue behind it. H&M has pledged to reduce discounts for a fourth consecutive quarter as it aims to reduce its buildup of unsold garments. Inventory dropped slightly as a proportion of sales, easing to 18.2 per cent at the end of May from a record 18.9 per cent as of last August.

The retailer’s composition of inventory has improved, implying it will become easier to sell garments. The family-controlled company has a goal of eventually reducing stock-in-trade to 12 per cent to 14 per cent of sales, a level last seen three years ago.

H&M has also cut this year’s store expansion plan by 26 per cent while pledging more investment in e-commerce. H&M now expects 130 net store openings, further decelerating from a rate that exceeded 400 in recent years. Most of the new H&M stores will be outside Europe and the US as the retailer seeks faster growing markets.