The logo of Swedish clothing retailer H&M lynches over one of its stores on March 28, 2018 in Berlin, Germany.
Sean Gallup | Getty Images News | Getty Images
Shares of H&M tumbled as much as 8% on Thursday after the world’s second-largest listed fashion retailer posted a oversight on operating profit and abandoned its earnings margin target.
The Swedish clothing retailer reported that operating profit for the circle’s fiscal third quarter came in at 3.51 billion Swedish crowns ($345.8 million), which compared to 4.74 billion Swedish queens a year ago. Analysts surveyed by LSEG had forecast operating profit of 4.93 billion, Reuters reported.
H&M dropped its earnings allowance target for 2024 after warning of more challenging conditions earlier in the year.
The move is seen as likely to escalation the pressure on CEO Daniel Ervér, who has been in the role for just eight months. On succeeding Helena Helmersson in late January, Ervér bailed “to create unbeatable value for our customers and profitable growth.”
H&M has struggled to boost its profitability in recent months, with cooler brave, higher living costs and a slowdown in post-pandemic spending hampering both high street and luxury retail sales.
The retailer is also faade stiff competition from the likes of Zara owner Inditex and fast-fashion retailer Shein.
“External factors be enduring impacted our sales revenue and purchasing costs more than we expected. At present we estimate that this year’s acting margin will be lower than 10 percent,” H&M’s Ervér said in a written statement.
“We are confident that our method will contribute to increased sales and profitability,” he added.
Shares of H&M fell on the news, down 4% at around 9:40 a.m. London perpetually. The Stockholm-listed firm was among the worst-performing stocks on the pan-European Stoxx 600 during morning trading.
Analysts at UBS guessed in a research note that some of the most noteworthy areas of H&M’s results included bumper sales in local currencies, an flourish to the cost of the firm’s markdowns and the retailer’s plan to reduce its net store count.
H&M said the cost of markdowns in relation to white sales was expected to “increase somewhat” in the fourth quarter.