Sweden: Shares of H&M plummeted by as much as 8 on Thursday after the global fashion retailer posted disappointing third-quarter results and scrapped its 2024 earnings margin target.
The Swedish company reported operating profits of 3.51 billion Swedish crowns ($345.8 million) for the fiscal third quarter, down from 4.74 billion crowns a year earlier. The figure also fell short of the 4.93 billion crowns forecasted by analysts, according to Reuters.
H&M's decision to drop its earnings margin target comes after the retailer warned of challenging market conditions earlier this year. The announcement increases the pressure on CEO Daniel Ervér, who took over in January 2024. Ervér had promised to deliver "unbeatable value" for customers and achieve profitable growth.
H&M’s profitability has been hit by a mix of factors, including cooler weather, rising living costs, and slowing post-pandemic consumer spending. The retailer also faces fierce competition from rivals like Zara-owner Inditex and fast-fashion giant Shein.
“External factors have affected our sales revenue and purchasing costs more than we anticipated. We now estimate our operating margin for this year will fall below 10%,” Ervér said in a statement, though he remains optimistic that H&M’s strategy will boost both sales and profits.
H&M shares fell 4 percent as of 9:40 a.m. London time and were among the worst performers on the Stoxx 600 during European morning trading.
In a research note, UBS analysts highlighted several key factors from H&M’s results, including strong local currency sales, rising markdown costs, and the retailer's plan to reduce its store count. H&M warned that the cost of markdowns in relation to sales would likely "increase somewhat" in the fourth quarter.
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