H&M issues profit warning after sales miss target

H&M Group’s pursuit of global fast-fashion dominance appears to be slipping further out of reach after the retailer was forced to discard its annual profitability targets.
Daniel Ervér, its chief executive, said the group had dropped its earnings margin target for the year because of higher marketing costs, weakening demand and “turbulence in the world around us. External factors have impacted our sales revenue and purchasing costs more than we expected.”
Of the group’s 10 per cent forecast, he added: “At present, we estimate that this year’s operating margin will be lower.”
The Swedish group behind the H&M, Arket and Cos labels said that a chilly start to the summer had taken its toll in the third quarter. Operating profit was down 26 per cent from a year earlier to SwKr3.5 billion (£258 million), well below analysts’ expectations of SwKr4.9 billion. It reported revenue of SwKr59 billion, relatively flat against the same period last year.
Ervér said that the quarter had “started with slow sales in June due to cold weather in many of our key European markets”. Sales had picked up in July and August, however, “with even stronger sales development in September”.
H&M, founded in 1947 under the name Hennes, is the second largest international clothing retailer after Inditex, the Spanish company that owns Zara. It has more than 4,200 shops in 77 markets. For more than a decade it has grappled with weak profitability while struggling to keep pace with Inditex, which in recent years has been able to pass on inflated costs to its less price-sensitive shoppers. The rise of Shein has further intensified the challenges facing H&M, putting additional pressure on its market position.
The anticipated shortfall in its margin targets is a setback for Ervér, 43, who stepped in after the abrupt resignation of Helena Helmersson. In recent months he has emphasised the need for H&M to increase sales while also achieving its profitability goals.
He told investors that 2024 was “a year in which we’re laying the foundation for future growth. We’re increasing the pace of improvements in our customer offering and deprioritising things that don’t strengthen our brands or contribute to our sales and profitability.”
Stockholm-quoted shares in H&M closed down by SwKr8.35, or 4.6 per cent, at SwKr173.