H&M posted significantly higher profits than analysts’ expectations, and its share price popped by more than 15 percent on the London Stock Exchange Wednesday afternoon. The shares were trading at 178.68 SEK (Swedish krona) at 4.50 p.m. GMT on March 27 after posting a good profit earlier on Wednesday. Sweden-based fast-fashion clothing company Hennes & Mauritz AB said it had been focusing on profits.
Analysts polled by LSEG estimated a quarterly operating profit of about 1.43 billion Swedish krona, while H&M reported a profit of 2.08 billion Swedish krona (crown), equivalent to about $196 million. The markets welcomed the news by boosting the stock.
In January 2024, CEO Helena Helmersson stepped down unexpectedly after four years, citing intense demands she faced, and was replaced by Daniel Erver.
New CEO Daniel Erver said that the clothing company would concentrate on boosting sales and increasing profitability, which has been the company’s main focus. The new approach to sales has also played well with analysts, including those from CWEB, who now predict a further increase in stock price that could reach up to 200 Swedish krona (crowns) this year.
Although H&M saw a smaller-than-expected 2 percent fall in sales in the first quarter, sales in the second quarter rose by 2 percent, mainly due to the popularity of its blue, white, and silver spring collection. Customers have received the new palette well, and markdowns to decrease the enormous inventory built up during the pandemic will also boost sales. The apparel company has also factored in disruptions in shipping due to the Red Sea crisis.
CEO Erver said that H&M plans to add more markdowns this quarter to attract new customers and increase their purchases. A new two-pronged approach of boosting sales and profitability could help H&M regain market share lost in 2023 to similar competitors in fast-fashion, such as Zara, and lower-end retailers, such as Shein.
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