By Dominic Chopping
Swedish fashion retailer Hennes & Mauritz (H&M) is set to announce its fiscal fourth quarter results on Wednesday. Here’s what you should know:
Net Profit Forecast
According to a FactSet poll of 16 analysts, H&M is expected to report a net profit of 3.19 billion Swedish kronor ($305.4 million) for the period spanning September to November. This marks a significant improvement from last year’s loss of SEK864 million, which was largely impacted by higher costs and the loss of its profitable Russia business amounting to SEK5 billion.
Share Performance
H&M’s shares have shown a considerable increase of 32% over the past year, reaching approximately SEK166.58. The company has been diligently implementing an efficiency program aimed at saving SEK2 billion annually, while simultaneously prioritizing profitability and inventory efficiency.
Key Points to Observe
Margin Recovery
Investors will closely monitor H&M’s progress in achieving margin recovery. With a goal of reaching a 10% operating margin by the end of 2024, the company has dedicated the year 2023 to enhancing cash flow and optimizing inventory efficiency. Although there was no explicit mention of this target in the company’s recent sales report for the fourth quarter, analysts at Citi anticipate that H&M will successfully meet this goal. Citi estimates an EBIT margin of 7.5% for H&M in Q4 of fiscal 2023.
Current Trading and Outlook
Another focal point will be the company’s current trading status and outlook comments. H&M has already released its sales figures for the quarter, which indicated flat sales at SEK62.63 billion—slightly below initial forecasts. Additionally, net sales experienced a preliminary decline of 4% in local currencies. Investors will also keep an eye out for any potential impact arising from the Red Sea shipping disruption, especially considering Asia’s significance as a major sourcing region for H&M.
Store Openings and Expansion Plans
Following the closure of approximately 700 stores (including 150 in Russia) over the past couple of years, Nordea predicts that H&M will begin opening a net total of 100 stores annually from 2024 onwards. “We anticipate a capex of SEK9 billion in 2024, compared to the guidance of SEK7.5 billion for 2023,” stated the bank in a note. Nordea also expects H&M to reaffirm its commitment to achieving a positive impact on sourcing costs from external factors, particularly in the first half of the year. Furthermore, the company aims to maintain its target of attaining a 10% operating margin in 2024.