Sep 26, 2024 12:37 PM IST
H&M unlikely to meet 10% operating margin target this year due to poor summer sales in Europe, despite some recovery in June.
Hennes & Mauritz AB said it’s unlikely to hit an operating margin target of 10% this year after a washed-out summer in Europe hurt sales at the Swedish clothing retailer.
Chief Executive Officer Daniel Erver said that after the cold weather in Europe in June, the company saw a pick-up in sales, but warned that “at present we estimate that this year’s operating margin will be lower than 10%.” He also pointed to the continued high cost of living for consumers.
Operating profit for the third quarter came in at 3.51 billion kronor ($350 million), below analyst estimates.
Thursday’s results come amid a strategy shift for the Stockholm-based company under Erver who took over after Helena Helmersson stepped down abruptly in January. He needs to improve H&M’s competitiveness against key rival Inditex SA, whose shares surged earlier this month after it said its third quarter was off to a strong start.
H&M is also facing increasing competition from Chinese upstart Shein and has been recruiting Gen Z celebrities such as Lila Moss fronting the fall-winter 2024 collection in a bid to target a demographic it’s struggled to win over.
Younger consumers aren’t the only people H&M needs to appeal to. In August, analysts at Citigroup Inc. advised clients to sell shares in the Swedish firm and buy those in Zara-owner Inditex.