H&M Struggles with Sales Growth in Challenging Market Environment

H&M Group has reported flat sales in the UK and important European markets in its third quarter, largely due to unseasonably chilly weather in June impacting initial trading.

For the three months ending August 31, the multinational retailer saw a 3% decrease in global net sales, amounting to SEK 59 billion (£4.3 billion), down from SEK 60.9 billion (£4.5 billion) in the equivalent quarter last year. Sales remained unchanged when adjusted for local currencies.

This performance has prompted the company to alter its forecast, now projecting an operating margin below 10% for the year, a downgrade from earlier earnings expectations.

H&M CEO Daniel Ervér commented: “The quarter started with weak sales in June due to low temperatures in many of our key European markets. Nevertheless, sales improved in July and August, with a more substantial increase noted in September.”

“Despite a challenging start, we end the third quarter with sales in local currencies consistent with last year’s figures alongside effective cost management.”

For the nine-month period, net sales in local currencies stood steady at SEK 172.3 billion (£12.7 billion), with about 30% of total sales coming from online channels.

In Western Europe, including the UK, net sales fell by 4% for the quarter, although sales year-to-date showed no change.

H&M’s gross profit for the quarter reached SEK 30.1 billion (£2.2 billion), resulting in a margin of 51.1%, a slight uptick from 50.9% the previous year. For the nine-month period, gross profit climbed to SEK 91.4 billion (£6.7 billion), yielding a margin of 53%.

Despite these sales challenges, H&M reported positive feedback on its autumn collection, with projections indicating a 11% increase in September 2024 sales in local currencies compared to the same month last year.

Ervér noted: “The autumn collection exemplifies the best of H&M: outstanding fashion, quality at the best price, with all products produced sustainably. We are improving the experience in our online platforms and physical stores, alongside collaborations and exclusive events, raising our standards.”

He elaborated: “The year 2024 will be crucial for shaping our future growth path. We are speeding up enhancements to our customer offerings while deprioritizing activities that do not strengthen our brands or support sales and profitability.”

“Consumers are grappling with elevated living costs this year, amidst ongoing global instability. External factors have influenced our sales revenue and procurement costs more than we had anticipated. At present, we expect this year’s operating margin to fall below 10%.”

“We are bolstering the H&M brand through investments in product development, shopping experience, and marketing, which are already starting to produce positive outcomes that will aid in boosting sales and profitability.”

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