H&M misses forecasts, with weak demand and pressure on the stock market
Turnover down 3.3 per cent and net profit stable. The improvements in profit margins have failed to convince the markets
Results have fallen short of estimates and the turnaround remains stalled against a backdrop of increasing competition. H&M’s restructuring is beginning to improve margins, but this is not yet enough to bring about a genuine recovery in sales. The second-quarter results fell short of expectations and weighed on the share price in Stockholm, which fell by more than 5% during the trading session.
Turnover fell by 3.3% to 54.83 billion Swedish kronor, below market expectations, whilst net profit remained stable at 3.96 billion. Operating profit, at 5.91 billion, was below estimates, partly due to one-off costs related to restructuring. Excluding these items, however, EBIT rose by 11% to 6.59 billion, with the gross margin improving to 56.6%.
CEO Daniel Ervér explained that stricter stock management had bolstered profitability, but in some cases had limited the group’s ability to fully meet demand. The group therefore sees scope for improving the balance between supply and demand.
However, the issue of growth remains: June sales are expected to remain stable, which analysts see as a weak sign. Against a backdrop of uncertain demand, pressure from low-cost rivals – such as the Inditex group – and changes in consumer behaviour, H&M’s turnaround appears precarious.
