HONG KONG, CHINA – 08/07/2021: Pedestrians cross the street in front of Swedish multinational designer clothing retailer Hennes & Mauritz, H&M, in Hong Kong. (Photo by Boudrol Choukrot/SOPA Images/LightRocket via Getty Images)
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shares H&M The Swedish retailer's stock jumped 14% in early trades on Wednesday, after the Swedish retailer significantly beat earnings expectations for the first quarter of its fiscal year.
Operating profit rose to 2.08 billion Swedish krona ($196 million), versus 1.43 billion krona expected in a poll of analysts by LSEG, formerly known as Refinitiv. The company's operating margin rose to 3.9% from 1.3%, as it repeated its target of a 10% operating margin this year.
Net sales fell year-on-year in the first quarter, to 53.7 billion kroner from 54.9 billion kroner.
H&M has previously announced a focus on profitability, amid pressure from growing competition from Zara owner Inditex and Chinese fast-fashion retailers such as Shein.
“Development continued in the right direction in the first quarter with improved gross margin and operating profit, lower inventory and strong cash flow,” said H&M Group CEO Daniel Ervier, who joined the company at the beginning of the year after the shock resignation. Helena Helmersson.
In a call with analysts after the result was published, Erver said boosting sales was the company's top priority, and prices were expected to be lower at the end of 2024 than they were at the beginning of the year, according to a Reuters report.
Inventory was down 7% year over year in the quarter. The accumulation of excess unsold inventory has been a long-standing problem for the company, which has made reducing this inventory a key focus.
H&M's board of directors will propose a dividend of 6.5 kroner per share at its annual general meeting in May and will seek authorization to buy back its Class B shares, the company said on Wednesday.
Analysts at Jefferies said the quarterly results showed “mixed delivery to the top line,” but also a “significant gross margin” of 51.5%.
Jefferies' note added that credibility was lent to the company's 10% operating margin target by positive sales momentum in the early spring and summer season.
H&M's share price has been volatile in recent years, falling 37% in 2022 before rising 57% in 2023.
H&M stock price.
