H&M reported that the group’s third-quarter operating profit was 3.51 billion Swedish crowns ($345.8 million), compared with 4.74 billion Swedish crowns a year earlier.
The Swedish clothing retailer said it lowered its 2024 margin target after warning earlier this year that it would be more difficult to meet it.
H&M said it expects markdown costs as a percentage of sales to “slightly increase” in the fourth quarter.
H&M shares fell as much as 8% on Thursday after the world’s second-largest listed fashion retailer reported a miss in operating profit and abandoned margin targets.
The Swedish clothing retailer reported that the group’s third-quarter operating profit was 3.51 billion Swedish kronor ($345.8 million), compared with 4.74 billion Swedish kronor in the same period last year. Analysts polled by LSEG had forecast an operating profit of 4.93 billion, according to Reuters.
H&M lowered its 2024 profit margin target after warning earlier this year that things were getting tougher.
The move is likely to increase pressure on CEO Daniel Herbert, who has been in the job for just eight months. When he replaced Helena Helmersson at the end of January, Herbert promised to “create unparalleled value and profitable growth for our customers.”
H&M has struggled to boost profitability in recent months as cold weather, rising living costs and lower spending after the pandemic caused retail and luxury sales to fall.
The company also faces stiff competition from the likes of Zara owner Inditex and fast-fashion retailer Shein. “External factors are having a larger-than-expected impact on our sales and purchasing costs. At present, we expect our operating margin to be below 10 percent this year,” H&M’s CEO Herbert said in a written statement.
“We are confident that our plans will contribute to improving sales and profitability,” he added.
H&M shares slumped on the news, down 4 percent by about 9:40 a.m. London time. The Stockholm-listed company was one of the worst-performing stocks on the pan-European Stoxx 600 in morning trading. UBS analysts said in a research note that the most notable aspects of H&M’s performance included record local-currency sales, rising markdown costs and the retailer’s plans to reduce its net store count.
H&M said it expects markdown costs as a percentage of sales to “slightly increase” in the fourth quarter.
