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

HENNES & MAURITZ AB

(HM B)
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Hennes & Mauritz : H&M Heads into Winter with a Sharper New Look -- Heard on the Street

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10/01/2020 | 09:09am EDT

By Carol Ryan

Global fashion retailers face a potentially harsh winter, but at least they aren't wasting the crisis.

Shares in Swedish clothing chain Hennes & Mauritz rose 8% in morning trading Thursday after it reported good news about September sales. Revenue was 5% lower in the month compared with a year ago -- a sharp recovery from the 16% year-over-year drop for the three months through August that the company announced a few weeks ago.

H&M also beat earnings expectations for the summer quarter. The business made a pretax profit of 2.4 billion Swedish krona, or roughly $260 million, while analysts had thought it would barely break even. The same thing happened at Zara-owner Inditex, the world's largest clothing retailer by market value, and fast-fashion chain Primark, that both reported better-than-expected summer profit.

Global clothing brands have done a good job of controlling what they could during the pandemic. Despite widespread store closures in the spring, H&M ended August with the same amount of stock that it held a year earlier. Inditex, which has an especially flexible supply chain, is carrying one-fifth less. Having stores in Asia, where the pandemic first appeared, undoubtedly gave them more insight into what was coming next than regional retailers in Europe and the U.S. "They canceled orders early on and then were cautious about new ordering. So there has been less discounting and stock levels are better than expected," said Aneesha Sherman of brokerage Bernstein.

The crisis has handed retailers leverage with landlords too. H&M negotiated rent cuts of up to 30% in certain markets and plans to close 5% of its stores in 2021 as it reverses decades of expansion. Inditex will shrink its physical network by a more dramatic 12% over the next two years as more sales move online.

There are still issues to be fixed. H&M offers a "click-and-collect" service, where customers order online and pick up in store, in just 14 of the 70-plus markets it operates in. Rolling this out quickly is a priority. Overall, though, the Swedish company seems to have vastly improved its operating flexibility, bringing it more in line with best-in-class Inditex.

With case numbers rising in Europe and the U.S., investors need to worry about the risk of a relapse in the consumer recovery. Against this backdrop, it is reassuring that Europe's global fashion chains have found a sharper look.

Write to Carol Ryan at carol.ryan@wsj.com

(END) Dow Jones Newswires

10-01-20 0808ET


Stocks mentioned in the article
ChangeLast1st jan.
HENNES & MAURITZ AB -2.85% 153.45 Delayed Quote.-17.03%
INDUSTRIA DE DISEÑO TEXTIL, S.A. -1.65% 23.76 Delayed Quote.-23.08%
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Financials
Sales 2020 191 B 21 900 M 21 900 M
Net income 2020 1 905 M 218 M 218 M
Net Debt 2020 71 195 M 8 148 M 8 148 M
P/E ratio 2020 135x
Yield 2020 1,50%
Capitalization 262 B 29 821 M 29 939 M
EV / Sales 2020 1,74x
EV / Sales 2021 1,47x
Nbr of Employees 179 000
Free-Float 43,6%
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Mean consensus HOLD
Number of Analysts 26
Average target price 167,33 SEK
Last Close Price 158,05 SEK
Spread / Highest target 29,7%
Spread / Average Target 5,87%
Spread / Lowest Target -43,1%
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Managers
NameTitle
Helena Helmersson Chief Executive & Operating Officer
Karl-Johan Erling Persson Chairman
Adam Karlsson Chief Financial Officer
Joel Ankarberg Chief Technology Officer
Anders Gunnar Dahlvig Independent Director
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