Marie Mannes
STOCKHOLM (Reuters) – H&M cast doubt on its full-year profit target on Thursday after missing its quarterly profit forecast and predicting a fall in June sales, sending shares of the world’s No. 2 fashion retailer down nearly 14%.
Sales this month are likely to fall 6% in local currency terms from a year earlier, partly due to bad weather in many markets, the Swedish company said.
Chief Executive Daniel Erver said the group still believes in its 10% operating margin target for 2024, but it has become more difficult to achieve.
“External factors affecting our procurement costs and sales revenues, including materials and foreign exchange, will have a more negative impact than we expected in the second half,” he said.
“The most important prerequisite for achieving our goal is that sales growth will continue to strengthen in the second half of the year compared to the growth in the second quarter,” he added.
H&M (ST:) often falls short of Zara owner Inditex (BME:) and China-based fast fashion group Shein is rapidly expanding in Europe and plans to list on the London Stock Exchange.
The group’s shares fell almost 14% at the market open.
JPMorgan said the report was disappointing and expected shares to react negatively.
“We… do believe the June sales and margin comments could weigh on the broader sector,” the broker said.
The Swedish group has struggled to win back customers as its core of thrifty shoppers have been reluctant to spend as inflation eats into purchasing power.
H&M said net sales in the second quarter from March to May were up 3% in local currency terms from a year earlier, with growth across all customer groups and a positive trend in all regions.
Operating profit was 7.1 billion Swedish crowns ($672.5 million), down from 4.74 billion a year earlier but below the average forecast of 7.37 billion, according to a survey of analysts at LSEG.
($1 = 10.5564 Swedish krona)