Despite H&M closing its best quarter in seven years, analysts were concerned by the CEO’s comment that the 10% operating margin target for this year might not be achieved. This led to a 12% drop in the stock. In the last quarter, H&M recorded an operating margin of 11.9%, a double-digit figure not seen since 2021. The initial results of the spring collection were encouraging but may be difficult to maintain due to unfavorable weather conditions.
Clothing retail is a tough business in the current economic environment, where many customers are facing budget constraints. H&M faces strong competition from stores like Zara and online sales channels such as Shein. Today’s results confirm that the company’s recovery plan, led by new CEO Daniel Ervér since January, is yielding results. Earnings per share increased by 54% year-over-year, though analysts clearly expected an even higher figure.
Looking ahead, H&M may benefit from accelerated economic growth, particularly in Europe, hoping to boost consumer confidence. The first ECB rate cut earlier this month could help, although the central bank has not given clear guidance on further cuts in the near future.
Jean-Paul van Oudheusden, market analyst at eToro
