H&M, the Swedish fashion retailer, has announced a change in leadership as its sales continue to lag behind rivals such as Inditex and Shein. The unexpected announcement came as a surprise to many, causing H&M’s shares to drop by 12%. The company revealed that sales for December and January had fallen by 4% compared to the previous year, which is a concerning sign for the crucial Christmas shopping period.
Helena Helmersson, who had been CEO for four years, decided to step down from her role, citing the demanding nature of the position and her lack of energy to continue. Taking her place is Daniel Ervér, a company veteran who has been with H&M for 18 years. Ervér, who was previously the head of the retailer’s core H&M brand, will also retain this role alongside his new position as CEO.
H&M, the world’s second-largest listed fashion retailer after Inditex, has been struggling to compete with rivals like Zara and Shein, both of which have experienced stronger sales growth. In an effort to improve profitability, H&M has focused on cost-cutting measures such as store closures and staff layoffs. The company aims to achieve a 10% operating margin this year.
Despite the challenges, Ervér remains optimistic about H&M’s future. He stated in an interview with Reuters that the goal of reaching a 10% operating margin still stands, and the company will work hard to achieve it. However, H&M’s fourth-quarter operating profit margin fell to 7.2% from 7.8% in the previous quarter, which is a cause for concern.
Sales for H&M over the fourth quarter also fell by 4%, more than what the market had anticipated. In comparison, Inditex reported an operating margin of 20.3% over a nine-month period, with sales growing by 11.1% during the same period. Analysts from JPMorgan expressed disappointment with H&M’s results, stating that the weakness of their fourth-quarter profit slightly diminishes the credibility of the 10% margin target.
Karl-Johan Persson, the chairman of H&M and grandson of the company’s founder, remains optimistic about the future. He believes that H&M is in a strong position with good conditions to make further improvements this year. The Persson family, which holds a 51% stake in H&M, also shares this confidence.
Despite the recent setback, H&M’s shares have seen a 29% increase over the past 12 months. While the change in leadership may be seen as a positive step towards addressing the company’s challenges, only time will tell if H&M can regain its competitive edge in the fashion retail industry.