H&M The CEO resigned unexpectedly on Wednesday and was replaced immediately by company veteran Daniel Herbert, as the Swedish fashion retailer struggles to improve sales and profitability.
Sweden’s outgoing CEO Helena Helmarsson said she decided to step down after telling reporters the role was “very demanding” and she didn’t have the energy to continue. The fashion retailer’s shares fell 8%. .
The leadership change comes after H&M announced that sales in December and January were down 4% from a year earlier, a bad sign for the crucial Christmas shopping period.
Opens in a new tab H&M, the world’s second-largest listed fashion retailer after Inditex, struggles to compete with Zara, which has seen strong sales growth, and low-priced fast fashion giant Shein.
“I think the market will welcome this change once it digests the numbers,” said Adil Shah, portfolio manager at Storebrands in Oslo, which owns H&M shares.
“Speculation that profit margin targets will not be met is said to be one of the reasons for the CEO change,” he added.
H&M aims to achieve an operating profit margin of 10% this year, and has recently focused more on profitability than sales volume.
Mr Herbert, 42, has been with H&M for 18 years, most recently as head of the retailer’s core H&M brand, and will continue in that role alongside his CEO role.
“We think there’s a lot of things that need to be done or could be done to turn this business around. The question is whether the people who have been there for 18 years are the right people or whether we should take such steps. Do you have the authority?’” Bernstein analyst William Woods said.
H&M’s operating margin fell to 7.2% in the fourth quarter from 7.8% in the third quarter.
The company had previously said the goal was 10%, but on Wednesday it called it an “ambition.”
Sales, measured in local currency, from Dec. 1 to Jan. 29, the start of the first quarter of the fiscal year, fell 4% compared to a 5% increase in the same period last year. Sales in the fourth quarter also fell 4%, higher than market expectations.
Operating profit for the fourth quarter was $415.4 million, up from $821 million a year earlier, but below the $4.57 billion expected by analysts surveyed by LSEG.
JPMorgan analysts said the results were disappointing and that H&M’s weak fourth-quarter profit slightly undermined the credibility of its 10% margin target.
Karl-Johan Persson, chairman of H&M and grandson of founder Erling Persson, said the company was in a strong position with “good conditions for further improvement” this year.
“The stock was down 8% at SEK 154 (US$14.79) by 0840 GMT, but has risen about 29% in the past 12 months.”
