H&M to shed light on turnaround amid consumer confidence slump
H&M investors will be hoping the high street fashion chain shows it is on the road to recovery next week despite caution among many shoppers.
The retailer is expected to report a slight rise in sales for the latest quarter in an update on Thursday June 26 as it continues with its turnaround strategy.
It comes after the Swedish firm reported weaker-than-expected sales for the first quarter of its financial year in its previous update in March.
H&M saw net sales grow 2 per cent to 55.3bn Swedish krona (£4.24bn) for the three months to February 28.
However, it flagged that this slowed down to 1 per cent in March amid continued pressure on consumer finances.
Sales growth was also knocked by H&M’s plans to trim its store estate and help simplify its operations over the past year.
H&M said it had 40 net store closures over the quarter and has continued to shut sites in recent months.
H&M’s new boss started overhaul last year
The overhaul of its store estate is part of a major turnaround plan under Daniel Erver, who became chief executive last year.
The group, which also owns & Other Stories and Cos, is seeking to accelerate recent sluggish growth.
Deutsche Bank’s Adam Cochrane stressed however that trading in the latest quarter is “unlikely to be the turning point”.
He added: “H&M is progressing through its turnaround but there will be relatively limited evidence of this in Q2, given the unhelpful weather conditions around Europe and the impact of negative currency exchange translation.
“Our updated earnings forecast of 5.6bn Swedish krona is showing a 21 per cent decline year-on-year, better than 42 per cent in Q1 but still hard to provide evidence of a sustainable turnaround.”
Mr Cochrane added that a build up in stock inventory at the end of the first quarter is unlikely to have completely unwound in recent months and could pose “a further problem” going into the second half of the year.
Deutsche Bank predicted H&M would see sales growth slow to 1.5 per cent for the latest quarter but indicated this would be a roughly 5 per cent drop once currency rates are taken into account.
Jefferies equity analyst James Grzinic is more pessimistic, pointing to growth of 0.5 per cent for the quarter.
He said the brokerage is taking a “more cautious view” to H&M’s recent trading, after signs that the rival Chinese platforms are “losing momentum” in the US.
Meanwhile, fellow rival Inditex, which owns Zara and Pull & Bear, saw growth slow down to 6 per cent in recent weeks.
By Henry Saker-Clark, PA Deputy Business Editor