Sales
Hennes & Mauritz (H&M), the Swedish fashion retailer, is set to announce its fiscal third quarter results on Wednesday. The company has already provided a preliminary sales figure, showing a 6% year-on-year increase to 60.9 billion kronor ($5.51 billion). However, net sales in local currencies remained relatively unchanged during the period ending August 31.
Net Profit
According to analysts polled by FactSet, H&M is expected to report a net profit of SEK3.23 billion in the third quarter. This marks a significant improvement compared to the SEK531 million reported in the same period last year, which was negatively impacted by a one-time cost of SEK2.1 billion related to the winding down of its Russian operations.
Key Focus: Margins
Investors will closely monitor H&M’s progress in recovering its margins. The company has expressed its commitment to improving profitability and seems to be heading in the right direction to reach its margin target. However, due to weaker-than-expected sales in the third quarter, analysts at Citi predict that H&M’s EBIT margin for the period will be 7.1%, lower than their initial forecast of 8.2%.
Stay tuned for H&M’s official announcement to gain further insights into the company’s performance during the third quarter.
CURRENT TRADING
Eyes will also be on current trading and outlook comments. H&M reported third-quarter sales earlier this month that missed expectations, with the company stating that it had prioritized profitability and inventory levels in the quarter. Analysts at Citi tentatively forecast a sales drop of 7% in its September current trading, with confirmation of a progressively positive backdrop to the external factors for cost of goods sold and gross margin, they said in a note.
TARGETS
H&M is targeting SEK2 billion in annual cost savings from the second half, capital expenditure of SEK10 billion in 2023, and a 10% operating margin in 2024. “With H&M seeking to reassure on its trajectory towards its 10% margin target, we broadly hold our FY24 forecasts (adjusted EBIT/margin) at SEK20.8 billion/8.2% margin,” Citi said.
