Pedestrians cross the street in front of an H&M store in Hong Kong.
Sofa Pictures | Lightrocket | Good pictures
H&M shares fell more than 14% on Thursday morning after the company reported a smaller-than-expected increase in second-quarter profit and cast doubt on its June sales and full-year profit margin target.
Shares traded slightly lower at 9:00 am London time, down 13%.
The world’s second-largest retailer said operating profit for the March-May period came in at 7.1 billion Swedish kroner ($672 million), below the 7.37 billion Swedish kroner expected by analysts, according to an LSEG poll cited by Reuters.
However, the second quarter result was higher than the 4.7 billion Swedish kroner recorded in the same period last year.
The company said bad weather will dampen sales in June, which it expects to drop 6% in local currencies compared to the same period last year.
Further weighing on the stock, H&M CEO Daniel Ervér cast doubt on the company’s ability to hit its margin target this year.
“Our target of 10 percent operating margin for the full year 2024 remains in place,” he said. “However, the conditions to reach that level this year have become more challenging, as external factors affecting our purchasing costs and sales revenues, including commodities and foreign currency, are estimated to have a more negative impact than we expected in the second half of the year.”
He said the company continues to invest in its online and in-store experiences, with upgrades to stores in Paris, Milan, Berlin, Stockholm, Hamburg and Munich to follow those already done in New York, London and Tokyo.
It comes as higher living costs and a post-pandemic slowdown in spending weigh on both the high street and luxury retail.
Earlier this month, Zara owner Inditex announced a slowdown First quarter sales Compared to the previous year’s growth, May indicated a rise.
Meanwhile, Chinese-founded fast fashion giant Sheen is poaching European retailers as it prepares for a public listing in London.
