STOCKHOLM, Sweden — Sweden's H&M reported stronger-than-expected sales growth in the third quarter on Monday as the world's second biggest fashion retailer said its efforts to compete with online sellers and budget brands were bearing fruit.

H&M, whose shares had climbed 8.8 percent by 7am GMT, said its moves to face the shift in consumer tastes had contributed to gradually improved sales and increased share in many markets in the third quarter.

But the retailer, which has more than 4,700 stores, said the introduction of a new logistics system to speed up deliveries had hit sales and raised costs in important markets such as the United States, France, Italy and Belgium.

H&M's local-currency sales including value added tax (VAT) in the June-August period rose 4 percent from a year earlier, against a mean Reuters poll forecast for a 1.9 percent increase.

Reported sales excluding VAT were up 9 percent to 55.8 billion Swedish crowns, beating a forecast 5.5 percent rise to 54.0 billion crowns.

Biggest rival Inditex, the owner of Zara, last week reported 3 percent sales growth for the first half of its fiscal year to end-July and forecast second-half like-for-like sales growth of 4-6 percent and improved profitability.

H&M has seen profits shrink and inventories pile up over the past couple of years as sales slowed at its core budget brand.

It is due to publish its full fiscal third-quarter report on September 27.

By Helena Soderpalm; editors: Emma Thomasson, Edmund Blair