H&M Revenue Flat, Profits Sink in Q3 Due to Macro Pressures, Cold Summer Weather
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This story has been updated.
Hennes & Mauritz Group may have struggled with growth and profitability in the fiscal third quarter, but the Swedish fast-fashion giant is not giving up on its double-digit dreams.
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The company said during its third quarter presentation that operating margin for the 2024 fiscal year will be lower than its previously stated goal of 10 percent. In the third quarter it was 5.9 percent, down from 7.8 percent in the corresponding period last year.
“Double-digit profit is a long-term ambition,” said the group chief executive officer Daniel Ervér on the call that followed Thursday’s results statement.
The company also declined to say whether it could achieve its 10 percent goal in 2025, but vowed to continue improving sales, cutting costs, controlling inventory and polishing the product until it gets there.
“Sales are not where we need them to be, but we are committed to our long-term goals and focused on building and strengthening sales, and moving toward double-digit growth. We are confident that our plan will contribute to increased sales and profitability,” he said.
Ervér described 2024 as a year in which H&M is “laying the foundation for future growth, increasing the pace of improvements in the customer offering, and deprioritizing things that don’t strengthen our brands or contribute to our sales and profitability.”
As reported, H&M is being squeezed at both ends of the market, with fast-fashion competitor Zara benefiting from its trendier brand perception to hit historically high sales even as it has raised prices, and Chinese ultra-fast-fashion players like Shein offering bargains galore.
In response to the competition, H&M has been improving its fashion offer, upgrading its retail environments and broadening its price points as it looks to become a more efficient and profitable company.
A new retail concept began rolling out earlier this year with new store on London’s King’s Road, which opened in March. It offers a more upscale and curated fashion mix along with an improved focus on customer service, and styling tips.
During a call with analysts, Ervér acknowledged that performance was disappointing in the key summer months. He blamed the flat sales and drop in profits on consumers’ “high living costs, turbulence in the world around us and purchasing costs, which were more than we expected.”