H&M shares surge after fast-fashion seller beats analysts' expectations

By Louis Goss

H&M shares were on track to increase at their sharpest pace since June 2023 on Wednesday after the Swedish retailer posted better-than-expected first quarter results and reiterated plans to increase its margins to rates of 10% across the full-year 2024.

In its first set of quarterly results under new CEO Daniel Ervér who took control in February, the fast-fashion company posted a 186% surge in its operating profits to Kr 2.077 billion ($195 million), even as its overall sales fell 2.2% to Kr 53.7 billion.

H&M's higher operating profits came as the company upped its operating margins from 1.3% in the first quarter of 2023, to 3.9% in the first quarter of 2024, as it said it is still aiming to achieve a 10% operating margin for the full-year 2024.

Shares in H&M (SE:HM.B) surged 12% on Wednesday in what marks the highest increase since June 2023. The fashion company's stock price has increased 42% over the past 12 months.

The Stockholm headquartered company successfully controlled costs, in line with the efficiency program it launched last November, that saw it outline plans to save Kr 2 billion by cutting 1,500 jobs worldwide.

H&M CEO Ervér said the company is now seeking to capitalize on demand for cheap fashion from hard hit customers suffering from the impacts of inflation and higher interest rates and he said the company is also hoping to increase its margins up to 10% from current rates of 3.9%.

"We continue to plan our business with respect for a challenging situation in the world around us where consumers remain affected by inflation and high interest rates. In this situation our customer offering is more relevant than ever," Ervér said.

"Our top priority is to strengthen sales, and our target of a 10 percent operating margin for full-year 2024 thus remains in place," the H&M CEO said.

The Swedish company's lower sales were driven by declines in all regions apart from Eastern Europe, as the company also closed 31 of its shops, leaving it with 4,338 stores worldwide.

H&M, which is currently the world's third largest clothes retailer behind Nike and Zara-owner Inditex, however, said that it is currently working on plans to refurbish 250 of its stores worldwide throughout 2024.

-Louis Goss

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03-27-24 0644ET

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