H&M plans to close 250 stores next year, 5 percent of its current network, as the coronavirus crisis drives more shoppers online, the world's second-biggest fashion retailer said on Thursday, after reporting a smaller than expected drop in third-quarter profit.

H&M has been shutting more stores and opening fewer over the past couple of years as it adapts to the online shift that is driving more competition. The retailer said earlier this year, its net number of stores would decline already in 2020.

The company also said sales had continued to recover in September from the impact of the virus.

Chief Executive Helena Helmersson said: "Although the challenges are far from over, we believe that the worst is behind us and we are well placed to come out of the crisis stronger."

Rival fashion retail groups have also seen a recovery, with market leader Inditex, the owner of Zara, reporting a return to profit in its May-July quarter.

"Overall, Q3 is a better quarter than expected, and we think H&M continued to manage well what they could directly influence," analysts at JPM said in a note.

The Swedish company's pretax profit fell to 2.37 billion crowns ($265.6 million) in its fiscal third quarter, from a year-earlier 5.01 billion. Analysts polled by Refinitiv had, on average, seen a 2.03 billion crown profit.

In the March-May quarter, the pandemic had pushed H&M into a steep loss, its first in many decades, as sales halved.

H&M said its September sales were down 5 percent year-on-year in local currencies after they fell 19 percent in the three months through August.

Of more than 5,000 stores worldwide, 3 percent remain temporarily shut against around 80 percent at the height of lockdowns, it said.

H&M, which has struggled for years to stop a rise in inventories, said those were unchanged from a year earlier. Markdowns increased half a percentage point, and H&M predicted they would grow 1-1.5 percent in the current quarter.

(With input from Reuters)