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Fashion retailer H&M sees shares boost following upbeat results

Swedish company reported operating profit of €183 million in its first set of quarterly results since Daniel Ervér took over as chief executive

H&M is facing competition from Shein and Zara. Photograph: iStock

Wed Mar 27 2024 - 08:50

Shares in fashion retailer H&M closed up 15 per cent in London on Wednesday after it reported rising profits, signalling to investors that it is on track to hit its new higher targets.

In its first set of quarterly results since Daniel Ervér took over as chief executive last month, the Swedish company reported operating profit of SKr2.1 billion (€183 million) in the three months to the end of February, compared with SKr725 million in the same period a year ago.

Net sales in the period were SKr5.4 billion. The 2 per cent fall compared with last year was less than analysts had expected.

The company, which has struggled to compete with lower-cost rivals as well as Inditex’s Zara, aims to raise its operating profit margin to 10 per cent this year – up from 6.2 per cent last year.

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In January Mr Ervér, who joined H&M in 2005 and took over from Helena Helmersson this year, said he believed the company could thrive despite competition from lower-cost producers.

“I am confident that we have a very good direction for where we’re heading. Cash flow and profitability are improving, which allows us to invest further,” he said.

But some analysts sounded a note of caution, saying that although H&M had beaten its first-quarter operating profit forecasts, sales remained below pre-pandemic levels. The group has been working to reduce its inventory and analysts at Citi noted levels had fallen, as well as improvements in “supply chain efficiencies”.

[ New boss seeks to make H&M even faster at fashion ]

But they also flagged weak performance in the Americas, where sales were down 5.9 per cent year-on-year, compared with a 2.2 per cent fall for the group overall.

The company, three-quarters of which is owned by the Persson family, has been trying to improve its environmental sustainability scores, including through an initiative to use more recycled polyester. – The Financial Times

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