H&M shares fell 13% on Thursday after its CEO questioned the company’s ability to meet its full-year profit targets and predicted weak sales in June.
The Swedish company said its sales this month were expected to fall 6 percent year-on-year in local currency terms, due in part to continuing bad weather in many markets.
Chief Executive Daniel Arbour said H&M still maintained its target of a 10% operating profit margin for 2024, but that it was becoming harder to achieve.
“External factors affecting our purchasing costs and sales, such as raw materials and foreign currency, will have a more negative impact than expected in the second half of the year,” he told Reuters.
The group says it needs further sales growth in the remaining two quarters to meet its profit targets, and it aims to achieve this through further price discounts.
Elber told analysts and reporters that H&M reduced discounting in June, which was a positive sign in the long term but had a negative impact in the month.
Shares fell 13% to $3.16, H&M’s biggest one-day drop since the early 2000s.
H&M’s net sales for the second quarter of its fiscal year, from March to May, increased 3% year-on-year in local currency.
Operating profit was 7.1 billion Swedish kronor ($672.5 million), up from $4.74 billion a year earlier but below the average forecast of $7.37 billion. LSEG analyst poll:.
The weaker-than-expected results come at a time when many consumers are facing higher living costs due to inflation and retailers are suffering from a post-pandemic decline in spending.
The Swedish group also cheapest price Luxury fashion from Shein and Zara’s parent company Inditex is more Luxury Customers.
But Arbour remains optimistic about H&M’s third quarter.
He said he expects profits to rise as the weather improves and consumers gravitate toward popular new spring and summer clothing collections.
“We feel more confident about the remainder of the quarter than we did about the first month,” he said.
The CEO also said the company is expanding its online and brick-and-mortar presence, and will be revamping its online store in the fall as well as upgrading its stores in New York, London, Seoul and Tokyo.
With post wire
