H&M drops 2024 profit margin target, third-quarter profit lags By Reuters

STOCKHOLM (Reuters) – H&M, the world’s second-biggest fashion retailer, said on Thursday it no longer expected to meet its full-year profit margin target, while reporting a lower-than-expected operating profit for the period June-August.

H&M ( ST: ) has struggled to boost profitability amid high inflation and stiff competition from its biggest Spanish rival Zara, owned by Inditex (BME:) and rapidly growing online discount fast fashion retailer Shein.

“We currently estimate this year’s operating margin to be less than 10 percent,” Chief Executive Daniel Erver said in a statement.

The accumulated margin was 7.4% in the first three quarters.

Full-year operating margins for 2022 and 2023 were 3.2% and 6.2% respectively, and H&M warned in June that factors such as material costs and currency made the 2024 target more difficult to achieve .

Operating profit for the Swedish group’s fiscal third quarter was 3.51 billion Swedish crowns ($346 million), up from 4.74 billion last year and an average forecast from an LSEG survey analyst’s 4.93 billion.

H&M said its fall collection was very well received and sales for September are expected to be up 11 percent in local currencies compared to the same period last year.

Inditex earlier this month reported a rise in sales of its autumn and winter collection after a slow summer hit by bad weather, while Britain’s Next raised its profit forecast amid better-than-expected recent trading.

Thursday’s earnings report was only the second under Erver, a longtime company insider who took over at H&M in late January following the sudden resignation of his predecessor.

H&M shares are up 2.7% year to date, behind a 33% rise in Inditex.

($1 = 10.1443 Swedish kronor)