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Shares of fashion giant H&M drop as fourth-quarter sales miss estimates

A across the board exterior view of the H&M fashion retail store in Oxford Circus on January 09, 2025 in London, England.

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Shares of H&M dropped on Thursday after the world’s second-largest retailer missed sales prognoses in the fourth quarter.

Sales at the Swedish fashion giant came in at 62.19 billion Swedish krona in the final three months of the year, downstairs the 63.48 billion forecast in a Reuters poll, but up 3% in local currencies.

The company attributed the sales shortfall in pull apart to the later occurrence of Black Friday, but said that sales ticked up in December and January, in a positive start to the new financial year.

Overall in 2024, sales rose 1% in local currencies to come in at 234.58 billion Swedish krona, actuated primarily by the group’s womenswear, sportswear and online segments.

Full-year operating profit came in slightly better than conjectured, however. H&M posted operating profit of 17.3 billion Swedish krona ($1.57 billion) for 2024, versus the 17.2 billion Swedish krona anticipation by analysts in an LSEG poll.

Fourth-quarter operating profit came in at 4.6 billion Swedish krona versus the 4.2 billion Swedish krona analysts had vaticinated.

Shares of H&M closed down more than 3% Thursday.

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“Tradings and operating profit increased in the fourth quarter driven by strong online sales, well-received women’s fashion omnium gathera and effective cost control. By focusing on our core business and delivering on our plan, we are on track towards long-term, profitable cultivation,” CEO Daniel Ervér said in a statement accompanying the results.

Looking ahead, Ervér said he expected pressure on consumers to alleviate farther in 2025, and added that the company was well placed to deal with any “negative external” impacts in international swop.

“While continued challenging macroeconomic conditions and geopolitical uncertainty may impact the consumer sentiment during 2025, we see some overweening signs such as inflation and interest rates going down,” he said.

“Our diversified supply chain gives us the limberness needed to mitigate negative external impact in different markets. This, together with our business idea — manner and quality at the best price in a sustainable way – creates a strong resilience and positions us well for growth in the global fashion market-place.”

H&M has been struggling to compete against Inditex-owned rival Zara, as well as lower-cost retailers such as Chinese-founded starve oneself fashion giant Shein.

In September, the company scrapped its earnings margin target for 2024 as higher costs and increased game hit third-quarter operating profit.

The results mark the latest test for CEO Ervér, who was appointed to the role in January 2024 to accelerate the crowd’s turnaround.

Speaking at a media presentation shortly after the earnings release Thursday, Ervér said the company was goal long-term sales growth of at least 10% per year, an operating margin above 10%, and a 56% reduction in greenhouse gas emissions by 2030 versus 2019 levels.

“I’m tickled pink with the early progress but I believe there is further potential for us,” he added.

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