The third quarter result (June 1–August 31) was a bleak story for H&M. The profit of nearly 3.1 billion kronor was significantly lower than the previous year and far below market expectations (on average 4.6 billion kronor).
Sales simultaneously amounted to 59 billion kronor, which was marginally below the expected level. CEO Daniel Ervér sees several explanations for the meager result:
Strengthened krona affects
First and foremost, the strengthened krona has a negative impact on our profitability. Some external factors such as freight prices and raw material prices have also increased, he says to TT.
Getting the operating margin up to 10 percent for the full year has been one of the biggest issues for Daniel Ervér since he took over as CEO. However, the market has been pessimistic about achieving this already this year, and now the company is announcing that it will likely not reach the target this year.
The goal as such remains. With full focus forward, we will be able to drive growth, but we want to be transparent that we will not reach it under 2024, says Daniel Ervér.
Multiple closures
In connection with the report, H&M is also making a store update. From previously announcing 60 net closures, the figure is now being raised to 100. According to Daniel Ervér, stores are primarily being opened on growth markets, for example, H&M is establishing itself in Brazil. Closures are taking place on "mature markets", but what this means for the Swedish part, he does not want to reveal.
When it comes to closures, we want to be cautious about going into this. We are handling it with, among other things, union representatives, he says.
Among a range of setbacks, there is at least one bright spot for H&M regarding September sales. Monthly sales are expected to increase by 11 percent in local currencies compared to the previous year.
However, this does not mean an economic relief for consumers in line with interest rate and inflation declines.
We are meeting low comparison figures, and autumn has come earlier this year in Central Europe, which supports sales growth. But when it comes to the customer's purchasing power, we see that it is still affected.
Corrected: An earlier version contained an incorrect date.