HONG KONG, CHINA – 2021/08/07: Pedestrians cross the road in front of the shop of Swedish multinational clothing retailer Hennes & Mauritz, H&M, in Hong Kong. (Photo by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)
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The company’s shares rose 14% in early trading on Wednesday after the Swedish retailer significantly beat earnings expectations for its fiscal first quarter.
Operating profit rose to 2.08 billion Swedish kronor ($196 million), compared with a forecast of 1.43 billion kroner set in a survey of LSEG analysts. The company’s operating margin increased to three.9% from 1.3% as the corporate maintained its operating margin goal of 10% this 12 months.
Net sales in the primary quarter declined year-on-year, reaching CZK 53.7 billion from CZK 54.9 billion.
H&M has previously announced a give attention to profitability amid pressure from increasing competition from Zara owner Inditex and Chinese fast fashion retailers such as Shein.
“Growth continued in the right direction in the first quarter with improved gross margin and operating profit, lower inventories and strong cash flow,” said H&M Group CEO Daniel Ervér, who joined the corporate in the beginning of the 12 months following the unexpected resignation of CEO Helena Helmersson.
In a call with analysts after the outcomes were released, Ervér said that increasing sales is the corporate’s top priority and that prices are expected to be lower at the top of 2024 than in the beginning of the 12 months, in line with a Reuters report.
Inventories fell 7% year-over-year this quarter. The accumulation of excessive unsold inventory was a long-standing problem for the corporate, so the corporate’s major goal was to scale back this inventory.
As the corporate announced on Wednesday, H&M’s management board will propose a dividend of CZK 6.5 per share on the May annual general meeting and can seek approval for the repurchase of series B shares.
Analysts at Jefferies say the quarterly results showed “mixed revenue” but additionally “significant gross margin expansion” of 51.5%.
The company’s operating margin goal of 10% added credibility through positive sales momentum in the beginning of the spring and summer season, Jefferies added.
H&M’s share price has been volatile lately, falling 37% in 2022 before rising 57% in 2023.
H&M share price.
