H&M reports flat sales amidst challenging market conditions, dampened by cooler weather impacting trading.
- The fashion retailer’s third-quarter global net sales decreased by 3% to SEK 59bn, with flat sales in local currencies.
- Gross profit margins saw a slight improvement to 51.1%, yet the year-end operating margin forecast drops below expectations.
- Despite setbacks, positive sales trends emerged in late Q3, with a promising 11% sales increase in September.
- H&M reinforces brand strength through strategic product investment and enhanced customer experiences.
H&M has reported a challenging third quarter with stagnant sales across its key European and UK markets, primarily affected by cooler weather in June which significantly hindered trading. The company’s global net sales for the three months ending August 31, slipped by 3% to SEK 59 billion, compared to SEK 60.9 billion in the previous year. Nevertheless, sales remained flat when measured in local currencies.
The company did note a slight improvement in their gross profit margins, which rose to 51.1% from last year’s 50.9%, although this hasn’t prevented them from adjusting their year-end forecasts. The group now anticipates its operating margin for the year to fall below 10%, diverging from earlier targets, due to unforeseen economic factors such as persisting high consumer living costs and geopolitical disruptions.
CEO Daniel Ervér commented that the quarter’s beginning was marked by sluggish sales in June. However, there was a notable recovery in sales during July and August, culminating in stronger development by September. He remarked, “Despite a challenging start, we are concluding the third quarter with sales on par with last year in local currencies and with good cost control.”
While the year-to-date net sales remained static in local currencies, Western Europe, including the UK, experienced a 4% decline in net sales quarter-on-quarter. Significantly, around 30% of H&M’s total sales were generated from online platforms, demonstrating a pivotal shift in consumer shopping behavior.
Despite competitive pressures, particularly from Inditex’s Zara, which reported a 10% profit increase, H&M remains committed to strengthening its brand through product investment and better customer interactions. The autumn collection was well-received and is expected to drive a projected 11% increase in local currency sales for September compared to the previous year.
Daniel Ervér emphasized that 2024 is shaping up to be a foundational year for future growth, highlighting efforts to improve customer offerings and streamline brand messaging to enhance profitability.
In response to various external pressures that have affected sales revenues and purchasing costs more than anticipated, H&M is investing in enhancing the customer experience through upgraded digital and physical store experiences, along with new collaborations and events.
H&M navigates a challenging quarter with strategic focus on brand strength and consumer experience to foster growth.
