H&M casts doubt over margin target as June sales drop, shares fall

H&M cast doubt over its full-year profit margin target on Thursday after missing quarterly earnings forecasts and predicting a fall in June sales, sending shares in the world’s number two listed fashion retailer down almost 14 per cent.

Sales this month are likely to fall 6 per cent in local currencies versus a year earlier, partly due to poor weather in many markets, the Swedish company said.

CEO Daniel Erver said the group still believed in its 10 per cent operating margin goal for 2024 but that this had got harder to reach.

“External factors that influence our purchasing costs and sales revenues, including materials and foreign currency, will have a more negative impact than we expected in the second half,” he said.

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“The most important prerequisite for achieving our goal is that sales growth is further strengthened in the second half of the year compared with the second quarter increase,” he added.

H&M has often fallen short of Zara owner Inditex, while China-founded fast-fashion group Shein is expanding rapidly in Europe and plans a London stock market listing.

JPMorgan said the report was disappointing and expected a negative share reaction.

“We ... indeed think that the June sales and margin commentary could weigh on the wider sector,” the broker said.

The Swedish group has struggled to win back customers, with its core of cost-conscious shoppers reluctant to spend as inflation ate into purchasing power.

H&M said net sales in its March-May second quarter rose 3 per cent in local currencies versus a year earlier, with growth in all customer groups and a positive trend in all regions.

Operating profit was 7.1 billion Swedish crowns (€628.3 million), up from 4.74 billion a year earlier but below a mean forecast of 7.37 billion in an LSEG poll of analysts.