Hong Kong, China – 2021/08/07: A pedestrian crosses the street in front of the Hong Kong store of H&M, the Swedish multinational clothing design retailer Hennes & Mauritz. (Photo credit: Budrul Chukrut/SOPA Images/LightRocket, Getty Images)
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H&M shares soared 14% in early trading Wednesday after the Swedish retailer significantly beat first-quarter profit estimates.
Operating profit rose to 2.08 billion Swedish kronor ($196 million), compared to the 1.43 billion kronor expected in a survey of analysts surveyed by LSEG. The company’s operating profit margin rose from 1.3% to 3.9%, as it reiterated its target of 10% operating profit margin this year.
Net sales in the first quarter fell year-on-year from Skr 54.9 billion to Skr 53.7 billion.
H&M previously said it would focus on profitability under pressure from increased competition from Chinese fast-fashion retailers such as Zara owner Inditex and Shein.
H&M Group CEO Daniel Herbert, who joined the company earlier this year following the company’s sudden resignation, said: “Developments in the first quarter were in the right direction, with improved gross and operating profit and inventory reduction.” “The cash flow continued to be strong,” he said. Helena Helmerson.
Reuters reported that in a call with analysts after announcing the results, Herbert said that strengthening sales is the company’s top priority and that prices are expected to be lower at the end of 2024 than at the beginning of the year.
Inventories for the quarter were down 7% compared to the same period last year. The accumulation of excessive unsold inventory has been a long-standing problem for the company, and reducing this inventory has become a core focus.
H&M’s board of directors will propose a dividend of 6.5 kronor per share and seek approval for the B-share buyback at its annual general meeting in May, the company said on Wednesday.
Analysts at Jefferies said the quarterly results showed “mixed revenue” but also “significant gross margin growth” of 51.5%.
Jefferies’ note added that the credibility of the company’s 10% operating margin target was driven by strong early-season sales momentum through the spring and summer.
H&M stock has been volatile in recent years, dropping 37% in 2022 but rising 57% in 2023.
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H&M stock price.
