In major news on European stocks, shares of Sweden-based H&M Hennes & Mauritz AB Class B (DE:HMSB) fell yesterday after the company reported lower-than-expected Q2 results for FY24. The company reported an operating profit of SEK7.1 billion ($672 million) for the second quarter, below the SEK7.3 billion projected by analysts. Shares were also hit as the company expressed concerns about achieving its profit margin target for FY24 and issued a dismal sales outlook for June.
HMSB stock lost around 12% in yesterday’s trading session. Shares were trading down by 6% as of writing today.
H&M is a fast-fashion retail brand with a presence in more than 75 markets globally. Year-to-date, H&M stock has dropped over 5%, lagging behind its main competitor, Spain-based Inditex (ES:ITX) which has gained nearly 20% so far in 2024.
H&M’s Q2 Results Highlights
In Q2 2024, H&M’s net sales increased by 3% year-over-year to SEK 59.6 billion. The company’s operating income rose to SEK 7.1 billion from SEK 4.7 billion a year ago, while gross profit increased by 11% to SEK 33.6 billion. Also, the operating margin climbed to 11.9% from 8.2% in the corresponding period in the prior year.
On the other hand, Inditex reported in-line Q1 2024 results earlier this month, with net profit increasing by 10.8% year-over-year to €1.3 billion for the quarter ending April 30, 2024. Inditex’s Q1 gross margin increased by 13 basis points year-over-year to 60.6%. For the full Fiscal year 2024, the company expects a stable gross margin with a potential variation of plus or minus 50 basis points.
H&M’s Bleak Outlook
In terms of outlook, H&M is expecting a 6% decline in June sales in local currencies compared to the same period last year. The decrease is attributed to bad weather conditions in most of its large markets.
Additionally, the company has reaffirmed its operating margin target of 10% for FY24. However, it acknowledged the impact of challenging trading conditions. the company emphasized that factors such as currency fluctuations and material costs are expected to have a more significant impact on its second-half performance than anticipated.
Is H&M a Buy?
On TipRanks, HMSB stock has received a Hold consensus rating based on four Buys, four Sells, and one Hold recommendation. The H&M share price forecast is €15.90, which is 2.24% above the current price level.
