Shares of H&M saw a 14% increase after the company exceeded profit expectations for the first quarter of its fiscal year. The company’s operating profit rose to 2.08 billion Swedish krona, well above the 1.43 billion krona forecasted by analysts. H&M’s operating margin also increased to 3.9%, up from 1.3%, as it reiterated its goal of achieving a 10% operating margin for the year. Despite a slight decrease in net sales compared to the previous year, H&M remains focused on improving profitability amidst competition from other fast fashion retailers.
H&M’s new CEO, Daniel Ervér, emphasized the importance of strengthening sales and reducing prices in the coming years during a call with analysts. Inventory decreased by 7% year-on-year in the first quarter, marking progress in the company’s efforts to reduce excess unsold stock. The company’s board has proposed a dividend of 6.5 krona per share at its upcoming annual general meeting and seeks authorization for a buyback of its B shares. Analysts at Jefferies noted a “sizeable gross margin beat” of 51.5% and praised positive sales momentum.
The company has faced challenges with excess inventory in the past, which has impacted its financial performance. The new CEO is focused on improving sales and reducing prices to drive growth. H&M has seen fluctuations in its share price over the past few years, with a significant drop in 2022 followed by a strong rebound in 2023. Despite facing stiff competition from companies like Inditex and Chinese fast fashion retailers, H&M remains committed to improving profitability and achieving its 10% operating margin target.
Overall, H&M’s strong performance in the first quarter has boosted investor confidence, leading to a surge in the company’s share price. The CEO’s emphasis on sales growth and cost reduction aligns with the company’s strategy to improve profitability and compete effectively in the fast fashion market. With positive momentum in the spring/summer season and a focus on reducing excess inventory, H&M is poised for continued success in the future. Investors will be closely watching the company’s progress as it works towards achieving its financial targets and maintaining its position in the retail industry.
