Shares of H&M Hennes & Mauritz AB Class B (DE:HMSB) collapsed over 10% yesterday after the fashion retailer posted weak sales for December-January and announced an abrupt CEO exit. H&M’s sales for December-January, including the prime Christmas period, fell 4% year-over-year. Meanwhile, failing to keep up with the “very demanding” job pressure, CEO Helena Helmersson stepped down yesterday.
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Stockholm-based H&M is a multinational fashion retailer. In recent times, tough competition from rivals like Inditex (ES:ITX) and Chinese online retailer Shein has impacted its turnover. HMSB shares have gained over 15% in the past year.
Details About H&M’s Performance
For the fourth quarter ending November 30, 2023, H&M’s operating profit margin of 7.2% came in below expectations. This displeased investors since the retailer often emphasized that its main focus currently is improving profitability instead of growing sales volumes. H&M aims to deliver an operating profit margin of 10% in Fiscal 2024 by cutting staff and closing nonviable stores.
H&M’s Q4 FY23 operating profit increased significantly by 428% from the year-ago period but was still below expectations. Sales remained flat in SEK (Swedish Krona).
In Fiscal 2023, H&M’s sales grew 6% in SEK. The company generated an operating profit margin of 6.2%, even though operating profits in SEK jumped 103%.
H&M’s Leadership Blow
In a surprise move, CEO Helena Helmersson stepped down from her role yesterday as the job had sometimes become too demanding for her. Helmersson was the CEO for nearly four years and navigated the company successfully through the COVID-19 pandemic and macro headwinds.
H&M named Daniel Erver, who has worked in the company for 18 years, as the new chief executive. Erver was the head of the H&M Brand and will continue in the role alongside his CEO position.
Is it Good to Invest in H&M?
Following the results and CEO exit news, three analysts reiterated a Hold rating on HMSB shares. Meanwhile, Bernstein analyst William Woods maintained a Sell rating on the stock with a price target of €12.45 (5.6% downside potential).
Overall, HMSB stock has a Moderate Sell consensus rating on TipRanks based on one Buy, three Holds, and four Sell ratings. The H&M Hennes & Mauritz AB Class B share price forecast of €14.75 implies 11.8% upside potential from current levels.
