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Shares of H&M plunged more than 14% on Thursday morning after the company reported a smaller-than-expected increase in second-quarter profits and cast doubt over its June sales and full-year profit margin target.
The stock pared losses slightly to trade down 13% by 9:00 a.m. London time.
The world’s second largest retailer said operating profit for the period between March and May came in at 7.1 billion Swedish kroner ($672 million), below the 7.37 billion Swedish kroner anticipated by analysts, according to an LSEG poll cited by Reuters.
The second-quarter result was nevertheless above the 4.7 billion Swedish kroner recorded in the same period last year.
The company also said that bad weather was likely to dampen sales in June, which it expects to decline by 6% in local currencies, compared with the same period of last year.
Further weighing on stock, H&M CEO Daniel Ervér cast doubt over the company’s ability to meet its margin target this year.
“Our goal of an operating margin of 10 percent for full-year 2024 remains in place,” he said. “However, the conditions for achieving that level this year have become more challenging as it is assessed that external factors that influence our purchasing costs and sales revenues, including materials and foreign currency, will have a more negative impact than we expected in the second half of the year.”
He added that the company was continuing to invest in both its online and in store experiences, with upgrades to stores in Paris, Milan, Berlin, Stockholm, Hamburg and Munich to follow those already undertaken in New York, London and Tokyo.
It comes as higher living costs and a slowdown in post-pandemic spending have weighed on both high street and luxury retail sales.
Earlier this month, Zara owner Inditex reported a slowdown in first-quarter sales compared to the previous year’s growth, but pointed to an uptick in May.
Meanwhile, Chinese-founded fast fashion giant Shein has been encroaching on European retailers, as it prepares for a public listing in London.