H&M Group’s quest for global fast fashion dominance seems to be further out of reach, after the retailer had to abandon its annual profit targets. Daniel Erver said that the group’s earnings target had been lowered for the year due to higher marketing costs, a weaker demand, and “turbulence” in the world. Our sales revenue and buying costs have been affected more than expected by external factors.
He added that, “At the moment, we estimate this year’s margin of operating profit to be lower.” The Swedish group that owns the H&M and Arket labels has said the cold start to summer took its toll on the third quarter. Operating profit fell 26 percent from the previous year to SwKr3.5 (£258 millions), which was well below analyst expectations of SwKr4.9. It reported revenues of SwKr59.4 billion, which is relatively flat compared to the same period in last year.
Erver stated that the quarter “started off with slow sales due to cold weather on many of our major European markets”. Erver said that sales had improved in July and August but “even stronger development in September”.
H&M was founded in 1947 as Hennes and is now the second-largest international retailer of clothing after Inditex. This Spanish company owns Zara. It has over 4,200 stores in 77 countries. It has struggled to maintain profitability for more than a century, while Inditex has been able in recent years to pass along inflated costs to their less price-sensitive customers. The rise of Shein has intensified H&M’s challenges, adding additional pressure to its market position.
Erver, 43 years old, is facing a major setback after Helena Helmersson abruptly resigned. Erver has stressed in recent months that H&M must increase its sales and achieve its profitability targets.
He told investors 2024 would be “the year we lay the foundations for future growth.” We are increasing the pace at which we improve our customer offerings and prioritising things that do not strengthen our brands, contribute to our sales or profitability.”
Stockholm-quoted H&M shares closed down SwKr8.35 or 4.6 percent at SwKr173.
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