STOCKHOLM (Reuters) -H&M, the world’s second-largest listed fashion retailer, said on Thursday it no longer expected to reach its full-year earnings margin goal, while reporting a lower-than-expected operating profit for the June-August period.
H&M (ST:HMb) has struggled to boost its profitability amid high inflation and stiff competition from its bigger Spanish rival Zara, owned by Inditex (BME:ITX), and the rapid growth of cut-price online fast-fashion retailer Shein.
“At present we estimate that this year’s operating margin will be lower than 10%,” Chief Executive Daniel Erver said in a statement.
The accumulated margin stood 7.4% for the first three quarters.
The full-year operating margins for 2022 and 2023 were 3.2% and 6.2% respectively, and H&M had cautioned in June that factors such as materials costs and foreign currency had made the 2024 target more difficult to reach.
Operating profit for the Swedish group’s fiscal third quarter stood at 3.51 billion Swedish crowns ($346 million) against a year-earlier 4.74 billion and a mean forecast in an LSEG poll of analyst of 4.93 billion.
H&M said its autumn collection has been very well received and that sales for the month of September were expected to rise by 11% in local currencies compared with the same period last year.
Inditex earlier this month reported a jump in sales of its autumn and winter collection after a sluggish summer marred by poor weather while Britain’s Next raised its profit forecast on the back of better than expected recent trading.
Thursday’s earnings report was only the second under the management of Erver, a long-time company insider who took the helm at H&M in late January following the sudden resignation of his predecessor.
H&M’s shares are up 2.7% year-to-date, lagging a 33% rise in Inditex.
($1 = 10.1443 Swedish crowns)
