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MarketScreener Homepage  >  Equities  >  NASDAQ OMX STOCKHOLM  >  Hennes & Mauritz    HM B   SE0000106270


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Hennes & Mauritz : H&M's sales growth fails to ease investors concerns about margin pressure

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06/17/2019 | 10:55am EDT
A logo is reflected in the window as it hangs outside the H&M store on Oxford Street in London

STOCKHOLM (Reuters) - Fashion retailer H&M reported sales grew for a fourth straight quarter on Monday, but also hinted it had needed to invest more to boost its online business, disappointing investors already concerned about margin pressure.

H&M, the world's second-biggest fashion retailer, has seen profits shrink and inventories rise in recent years as its core brand has not kept up with the online shift and tougher competition, and not reacted fast enough to demand swings.

While investing heavily in logistics, digital technology and store concepts, and reviewing its mix of stores and brands, H&M keeps struggling to convince investors it is back on track and its shares remain little above the 13-year lows seen in 2018.

The group, whose main rival is market leader Inditex, said on Monday that local-currency sales grew 6% in its fiscal second quarter, March-May, from a year earlier, matching expectations in a Reuters poll of analysts.

"The rapid changes in the fashion industry continue and we can see that our own transformation work is taking us in the right direction, although hard work and many challenges still remain," it said.

"As customer satisfaction and sales increase, we have intensified our transformation work even further," it said.

Shares in H&M were down 1.8% by 0841 GMT, partly because investors took its comments to mean it had had to spend more to transform its business.

Analysts at Jefferies, with a "hold" rating on H&M's stock, said the figure suggested an improved product offering was starting to gain traction, but added:

"Despite this we assume full earnings later in June will detail marked gross margin attrition - forex sourcing pain, reduced markdowns recovery - with opex inflation remaining elevated and leading to more operating profit margin pain."

H&M will publish its full second-quarter earnings report on June 27.

RBC analyst Richard Chamberlain, with a "sector perform" rating on shares, said H&M probably gained share in key markets, outperforming among others Gap which has suffered in a challenging U.S. market.

However, he said inventories probably remained high at the end of the quarter, and cautioned that sales comparisons become more challenging in the third quarter.

Loyalty scheme roll-outs and other investments, as well as costs for store closures had probably squeezed margins in the second quarter, he said.

H&M said net sales excluding VAT in March-May were up 11% at 57.5 billion crowns (£4.8 billion), just beating expectations.

Zara owner Inditex, which has weathered tougher market conditions in recent years better than H&M and other rivals, last week reported a 10% rise in local-currency sales for the six weeks from the start of May.

(This story corrects paragraph eight, removes incorrect attribution to Bernstein analysts and corrects to Jefferies)

(Reporting by Anna Ringstrom, Editing by Johannes Hellstrom/ Louise Heavens/Susan Fenton)

By Anna Ringstrom

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Financials (SEK)
Sales 2019 232 B
EBIT 2019 16 399 M
Net income 2019 12 826 M
Debt 2019 10 708 M
Yield 2019 5,04%
P/E ratio 2019 24,1x
P/E ratio 2020 22,4x
EV / Sales2019 1,38x
EV / Sales2020 1,34x
Capitalization 310 B
Duration : Period :
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Technical analysis trends HENNES & MAURITZ
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus UNDERPERFORM
Number of Analysts 24
Average target price 154,83  SEK
Last Close Price 187,20  SEK
Spread / Highest target 17,5%
Spread / Average Target -17,3%
Spread / Lowest Target -59,9%
EPS Revisions
Karl-Johan Persson Chief Executive Officer
Stefan Persson Chairman
Jyrki Tervonen Chief Financial Officer
Morten Halvorsen Head-Information Technology
Anders Gunnar Dahlvig Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
HENNES & MAURITZ48.55%31 968
KERING12.33%63 947
ROSS STORES30.66%39 324
ZALANDO81.68%11 166