Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Hennes & Mauritz, the world’s second-biggest listed fashion retailer, suffered a share price plunge on Thursday as the company issued a sales warning for June because of bad weather.
Shares in the Swedish group tumbled 15 per cent as the markets focused on performance for the rest of the year, despite a 50 per cent surge in operating profits to SKr7.1bn ($672.5mn) in March to May compared with the same period last year. Net sales jumped 3 per cent to SKr59.6bn.
Chief executive Daniel Ervér, who took the helm in January, said: “The situation in the world around us remains uncertain and households continue to have high living costs.”
H&M has been under pressure for more than a decade, losing its crown as the world’s largest fashion retailer to Zara owner Inditex as well as grappling with weak profitability and high inventory levels.
It has also had to contend with competition from new low-cost retailers such as Shein and Temu.
Although the group was in a “robust financial position”, Ervér warned that the group was likely to suffer from external factors that would hit purchasing costs. These included materials and foreign currency.
“This will have a more negative impact than we expected in the second half of the year,” he said.
The group has been focusing on improving profitability over sales growth by closing stores and raising prices.
On Thursday the company said gross margin during the second quarter rose to 56.3 per cent from 52.7 per cent, with Ervér hailing “our best results for many years”.
Richard Chamberlain, retail analyst at RBC Capital Markets, said “current trading was a little softer than we expected” but added that the family-controlled group had taken “various steps to improve its . . . offer for customers, which should lead to a stronger relative sales performance”.
“In addition, we see potential for it to move closer to its 10 per cent operating margin target this year owing to gross margin gains and further cost efficiencies.”
Read the full article here
