- Sales down 4% in December and January
- Fashion retailer unveils new CEO
- New broom Erver has work cut out
Shares in H&M (HM-B:STO) cheapened 9% to SEK153.5 (£1/SEK13.2) in Stockholm after the Swedish fashion retailer disappointed the market with news of a 4% sales slide for December and January that demonstrated there is still work to be done to turn the business round.
In order to shake things up, H&M announced an unexpected change at the top, with Daniel Erver taking over from Helena Helmersson, who has stepped down as CEO and left the group.
Continued weak sales from H&M sent shares in Primark parent Associated British Foods (ABF) and Zara-to-Massimo Dutti owner Inditex (BME:ITX) lower as investors absorbed the negative read-across for the fast-fashion sector.
FESTIVE SALES DISAPPOINT
Sales at H&M, the world’s second-biggest listed fashion seller behind Spain’s Inditex, decreased by 4% year-on-year between 1 December 2023 and 29 January 2024 as the fast-fashion firm’s Christmas performance fell flat.
For the fourth quarter to 30 November 2023, sales decreased by 1% while operating profit of SEK4.51 billion was shy of analysts’ expectations.
‘The fourth quarter started with unusually hot weather in several of our important European markets,’ bemoaned outgoing CEO Helmersson.
‘From mid-October sales recovered as more normal autumn weather returned, with well-received collections.’
GROSS MARGIN GAINS
H&M, whose brands include the eponymous label as well as COS, Arket and Weekday, has prioritised profitability over sales volumes in order to improve its return on sales against a difficult consumer backdrop.
Accordingly, sales growth for H&M’s 2023 financial year was subdued, with revenue edging up 6% higher to SEK236 billion, although gross margin strengthened thanks to ‘our improvement work in the supply chain and continued normalisation of the external factors that influence purchasing costs’, said Helmersson.
‘A focus on cost control, profitability and increased inventory productivity also contributed to improved cash flow that is financing increased reinvestments in the business. For many consumers the year was marked by lower purchasing power because of high inflation and high interest rates. Despite this, our net sales in comparable markets increased in relation to 2022.’
MEET THE NEW BROOM
New CEO Erver has worked within the H&M group for 18 years in various roles, most recently as head of the flagship H&M brand.
The new broom said he is ‘both honored and very happy for the board’s confidence and motivated and humbled by the task. Together with all committed colleagues, we will continue to create unbeatable value for our customers and profitable growth. Our focus will be on offering our customers the best combination of fashion, quality, price and sustainability in an inspiring and attractive shopping environment.’
