H&M shares tumble as bad weather hits June sales

By Louis Goss

H&M shares fell sharply on Thursday after the Swedish retailer said it expects to see a drop in its sales this June due to bad weather in Europe.

The Stockholm headquartered clothes seller reported a 3% uptick in its second quarter sales, to 59.6 billion Swedish Kronor ($5.6 billion), but said it expects its June sales will be 6% lower than a year ago due to Europe's "unstable" weather conditions.

Shares in H&M (SE:HM.B), listed in Stockholm, fell 14% on Thursday having previously gained 10% in the year-to-date prior to the company's announcement.

H&M, which is currently the world's second biggest publicly-listed fast-fashion company behind Inditex (ES:ITX), also said it may struggle to achieve its aim of boosting its profit margins to rates of 10% across the full-year 2024.

The clothes seller said higher materials costs and foreign currency impacts are likely to have a "more negative impact" than it previously expected in the second half of the year, after it achieved a profit margin of just 8.1% in the first six months of 2024.

The retailer's new CEO Daniel Ervér, who took up his job this January, said the company now needs to increase its sales in order to achieve its profitability target.

"The most important prerequisite for achieving our goal is that sales growth is further strengthened in the second half of the year," Ervér said in a statement.

H&M, which was started in the Swedish city of Västerås in 1947, has in recent months faced mounting competition from ultra-low-priced online rivals including Shein and Temu who are known for selling cheap bikinis and sunglasses for as little as $3 each.

The Swedish retailer had responded by seeking to boost its profitability by closing stores and increasing its prices in a strategy that was seen to be having an impact on revenue.

In January, H&M's long-time CEO Helena Helmersson stepped down from her position after 10 years at the top of the company before being replaced by Ervér, who started his career as a trainee at the retailer in 2005.

"The situation in the world around us remains uncertain and households continue to have high living costs. As always, our top priority is to ensure the best value for money in each market, " Ervér said in a statement.

Although H&M has more stores in the U.S. than in any other country, its biggest market by sales is Germany.

-Louis Goss

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06-27-24 0445ET

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