H&M stock is in good health

H&M, strengthens its secondhand apparel platform and cuts its gross margin by 2 points, while achieving an increase in revenue volume with 300 fewer stores.

In this scenario, the shares of the Stockholm-based company and Inditex’s main competitor, rose nearly 17 percent in the stock market after presenting the results of the first three fiscal months, which run from December last year to February this year.

Hennes & Mauritz obtained an attributable net profit of 52 million dollars (48 million euros at current exchange rates), an increase of 149 percent over the 20.6 million dollars (19 million euros) result recorded in the first fiscal quarter of the previous fiscal year.

The Swedish company highlighted the positive impact of the growth of Sellpy, its second-hand clothing retail brand, although its gross margin refluxed almost two points, from 49.3 percent to 47.2 percent, while the operating margin was 1.3 percent, compared to 0.9 percent recorded in 2022.

H&M and its markets

The apparel retailer’s net sales rose to $5.2 billion (€4.8 billion) in the fiscal first quarter, more than 11 percent above the previous year’s revenue, including an increase in physical store revenue, despite having 7 percent fewer stores.

At the end of the quarter, the company had 4,415 stores, which represents the closure of 300 stores, sites that contribute about 70 percent of its total turnover, the rest being contributed by online sales.

The Swedish company’s sales in Asia, Africa and Oceania reached 754 million dollars in these three months, a growth of 8 percent, while in Southern Europe they reached 680 million dollars, an increase of 12 percent; in Western Europe 16 percent, reaching 1,693 million dollars and in America they increased 24 percent, reaching 1,300 million dollars.

H&M sales

For the month of March they expect sales in local currencies to be up almost 5 percent over March 2022, the company said, noting that the start of the spring season was delayed in several major markets due to the cold weather, although the spring collections were well received in places where the weather was warmer.

“The company continues to be strong with a good financial position, stable cash flow and balanced inventory.

The start of this 2023 shows that we remain on track towards the goal of reaching an operating margin of 10 percent in 2024,” said Helena Helmersson, chief executive officer of the Scandinavian company.

H&M invests in Sellpy (and is doing well)

On the other hand, the CEO put in value that the consolidation of the Sellpy platform, in which the company began investing a decade ago, makes its value visible and has generated an accounting effect close to $96 million in these three months. “We have 25 other promising companies in our portfolio, such as Renewcell, TreeToTextile and Smartex,” she added.

H&M’s latest financial reports.

These numbers boosted the company in the stock market to $13.68, a boost that was not well received by analysts, because it trades almost 9 percent above its potential ($12.53) after analysts upgraded their target value.

In this context, only 30 percent of the Bloomberg consensus advises buying, another 37 percent recommend holding and the remaining 32 percent recommend selling.