Pedestrians cross the road in front of an H&M store in Hong Kong.
Sopa Images | Light Rocket | Getty Images
H&M shares plunged more than 14% on Thursday morning after the company reported lower-than-expected second-quarter profit growth and cast doubt on its June sales and full-year profit margin targets.
As of 9:00 a.m. London time, the stock narrowed its losses slightly, falling 13%.
The world’s second-largest retailer said operating profit for the March-May period was 7.1 billion Swedish kronor ($672 million), a Reuters poll showed, citing a London Stock Exchange Group (LSEG) poll. This was higher than analysts’ expectations of SEK 7.37 billion.
Still, second-quarter results were higher than the SEK 4.7 billion reported in the same period last year.
The company also said that bad weather may affect sales in June, and it expects sales to be down 6% in local currency terms from the same period last year.
H&M Chief Executive Daniel Ervér expressed doubts about the company’s ability to meet profit margin targets this year, further weighing on the stock price.
“Our full-year 2024 operating margin target of 10% remains unchanged,” he said. “However, the conditions to reach this level this year have become more challenging as it is assessed that the impact on our procurement costs and sales revenue External factors, including materials and foreign exchange, will have a greater negative impact in the second half of the year than we expected.
He added that the company would continue to invest in online and in-store experiences, with store upgrades in Paris, Milan, Berlin, Stockholm, Hamburg and Munich following New York, London and Tokyo.
Rising living costs and a post-pandemic slowdown in spending are weighing on high street and luxury retail sales.
Earlier this month, Zara parent company Inditex reported slowing sales growth first quarter sales Growth compared to last year, but an increase is expected in May.
Meanwhile, China-founded fast fashion giant Shein, which is preparing to list publicly in London, has been cannibalizing the market of European retailers.
About The Author
