H&M Group ‘Confident’ Despite Lackluster 2024 Results in Q4, Full Year
LONDON — It’s women’s day, every day, at H&M and there’s a good reason for that.
“This company is run by the female customer, and we need to win her trust by focusing our efforts on womenswear,” said group chief executive officer Daniel Ervér during a presentation following the fourth-quarter and full-year 2024 results.
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“She’s the one who’s doing the shopping — for herself, her husband, her children and the home,” said Ervér, arguing that if H&M’s womenswear is a success, then the other categories will follow. H&M is the largest brand in the group’s portfolio, with 3,777 stores in nearly 80 markets worldwide.
Ervér made his case for H&M womenswear as he delivered a lackluster set of results for the quarter, and full year ended Nov. 30.
His goal — eventually — is to achieve 10 percent sales growth, and at least 10 percent margin through organic sales. He’s still a long way off, but he’s confident that H&M will get there by focusing on the female customer, improving the product and upgrading the store environment and shopping experience.
The newly refurbished stores at Westfield Stratford City in London and Times Square in Manhattan are examples of the brand’s efforts to elevate the product and shopping experience.
Both cities’ stores have a luxury feel, with interiors done in sleek Scandi-style oak, stainless steel and glass, while there are special departments dedicated to womenswear, menswear, lingerie, activewear and beauty.
They also boast advanced tech. Changing rooms have been fitted with touch screens that offer styling tips, and the chance to order online, or request different sizes. Shop assistants are equipped to do mobile checkouts anywhere on the shop floor.
From a product perspective, the London store stocks a new, high-end children’s offer called H&M Adorables and houses an H&M Home shop-in-shop.
Ervér also believes that H&M’s home, athletic and beauty divisions have more potential to grow, and noted that the smaller retail brands in the portfolio, Cos and Arket, had performed strongly in the year.
“H&M has more growth potential than what we’re seeing today,” he said, adding that the company was looking forward to inflation and interest rates coming down, helping the brand on its journey.
In the fiscal fourth quarter, the Swedish fast-fashion giant saw sales dip 1 percent to 62.19 billion Swedish kronor, or $5.66 billion, while in local currency terms, they rose 3 percent.
In the three months to Nov. 30, profit nearly doubled to 3.08 billion kronor, or $28 million, due chiefly to the restatement of deferred tax in the corresponding period last year.
The fourth quarter started well, according to H&M, with customers responding positively to fall collections, but reporting was skewed by the timing of Black Friday, with the bulk of month-end sales reported in December, the start of H&M’s new fiscal year.
In the fourth quarter, sales in most of Europe grew in the low-single digits, with the exception of the Nordic countries, where they were down 4 percent. In the Asia-Pacific, Oceania and Africa region, sales fell 2 percent. They dipped 1 percent in North and South America.
In the full fiscal year ended Nov. 30, sales fell 1 percent to 234.48 billion kronor, or $21.33 billion, while in local currencies they increased by 1 percent, with around 30 percent of transactions taking place online.
Profit after tax was 11.58 billion kronor, or $1.05 billion, 33 percent higher than the previous year, due to the restatement of deferred tax in the previous period.
The current year, which began on Dec. 1, is off to a stronger start, bolstered by Christmas sales. In the period running from Dec. 1 to Jan. 28, group sales rose 4 percent in local currencies compared with the corresponding period last year, according to H&M.
Analysts’ reactions were tepid.
Jefferies said the fourth-quarter results “confirm that the step-up in marketing efforts is not having an especially significant impact on market share trends. This, at a time when consumers remain especially sensitive to promotional enticements and with [operational expense] inflation a bigger challenge than was historically the case.”
Deutsche Bank said that “weaker than expected current trading and gross margin outlook [are] likely to put pressure on first-quarter forecasts. In our view investors want to see a return to robust top line growth.”
H&M said last year’s middling performance was due to a number of factors, including the challenging macroeconomic environment, higher purchasing costs, and a more cautious consumer.
In response, it has been streamlining the business, moving Monki, which had its own string of stores, into the Weekday brand, and closing Afound, the group’s digital fashion outlet selling items from past and present collections.
From an operational point of view, the company is also cultivating “deeper partnerships” with suppliers, focusing on better sales predictions, faster response times and a “more current, more relevant assortment,” according to Ervér.
The company is also trying to match supply with demand in a more precise way, and is “near-shoring” in a bid to cut down on waste and transport times.
Ervér reminded the markets that H&M’s goal is to slash greenhouse gas emissions by 56 percent by 2030, and said that Scope 3 emissions (from value chain assets not controlled by H&M) have dropped by at least 23 percent compared to the 2019 baseline figure.
He added that Sellpy, which is majority owned by H&M Group Ventures, is now one of Europe’s largest secondhand traders. The site that sells fashion, accessories, toys and consumer electronics, as well as H&M archive pieces, and is now in 24 markets.
H&M shares closed down 3.4 percent to 148.70 kronor, or $13.49 on the Nasdaq Stockholm.
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