Shares of H&M fell on Thursday after the Swedish fashion retailer reported lower-than-expected fourth-quarter sales, despite a slight increase in full-year operating profit. The company cited the later timing of Black Friday as a factor in the sales shortfall but noted an improvement in performance at the start of the new fiscal year. For the three months ending November 30, 2024, H&M recorded sales of 62.19 billion Swedish kronor, falling short of the 63.48 billion kronor forecasted by analysts in a media poll.
However, in local currency terms, sales grew 3%. Full-year revenue rose 1% in local currencies to 234.58 billion kronor, supported by strong performance in womenswear, sportswear, and online segments. Operating profit for the full year slightly exceeded market expectations, reaching 17.3 billion kronor ($1.57 billion) compared to the 17.2 billion kronor estimated in an recent survey. Fourth-quarter operating profit stood at 4.6 billion kronor, surpassing analyst predictions of 4.2 billion kronor.
These figures failed to reassure investors, with H&M’s stock dropping over 3% on Thursday. CEO Daniel Ervér remained optimistic, stating that consumer pressure is expected to ease further in 2025. He acknowledged the ongoing challenges posed by macroeconomic conditions and geopolitical uncertainties but expressed confidence in H&M’s ability to navigate external disruptions through a diversified supply chain and continued focus on delivering fashion and quality at the best price in a sustainable way.
Despite recent improvements, H&M continues to face stiff competition from Inditex-owned Zara and lower-cost players such as Shein. The retailer has been working to streamline operations and improve efficiency, a process accelerated since Ervér took the helm in January 2024. In September, H&M abandoned its earnings margin target for 2024 due to higher costs and intensified market competition, particularly affecting third-quarter performance.
At a media presentation following the earnings announcement, Ervér reiterated H&M’s long-term goals, which include achieving annual sales growth of at least 10%, maintaining an operating margin above 10%, and reducing greenhouse gas emissions by 56% by 2030, relative to 2019 levels. The company reported that Scope 3 emissions which account for indirect emissions across its value chain have already declined 23% since 2019.
Looking ahead, H&M reported a 4% increase in local currency sales between December 1, 2024, and January 28, 2025, suggesting a stronger start to the new fiscal year. The company plans to prioritize supply chain efficiency, improved product offerings, and enhanced brand positioning to drive future growth and profitability. – By MENA Newswire News Desk.