H&M Q4 sales beat forecasts, but meaningful growth is elusive

By

Sandra Halliday

Published
Dec 15, 2022

The world's second-biggest fashion retailer has reported headline sales for the latest quarter up 10% year on year, which slightly beat analysts’ expectations of a 9.5% rise in the three months to November.

H&M’s Q4 net sales were SEK62.5 billion (€5.7bn/£4.9bn/$6.1bn) and while that was an increase on a reported basis, in local currencies, net sales were all-but-unchanged compared to Q4 last year. 

The latest figures also represented a weaker rise than the year as a whole with net sales for the fiscal year up by 12% to SEK223.5 billion. In local currencies, they rose 6%.

Despite Q4 numbers coming in better than analysts had predicted, the company’s share price dropped over 3% in early trading on Thursday. It means the shares are down over 35% for 2022 so far.

That's perhaps unsurprising given what has happened in the last year with the company battered by supply chain issues, weakening consumer sentiment and the need to pull out of Russia. In fact, it said that for Q4, excluding Russia, Belarus and Ukraine, the sales increase would have been 11% in SEK and 2% in local currencies. And for the year it would have been 15% in SEK and 8% in local currencies.

The group’s operations in Russia and Belarus were wound up during the quarter, with its remaining stock being sold and its last stores closing on 30 November. 

It was also hit in the period by temporary closures in China due to Covid with around 25–50 stores in China shuttered as a result of new outbreaks there.

Given that results from its even bigger rival Inditex came out a day before H&M’s and the Zara owner reported sales in the most recent months up 12% on the year, the Swedish firm’s figures look respectable. Set against the issues in Russia and China, as well as the wider declining economic backdrop, it's encouraging that the company is managing to stay on track.

But it does need to ignite meaningful growth for its chains that include Arket, Cos, Monki, & Other Stories, and Weekday, as well as it signature brand. It didn’t offer any commentary with the figures about how this will be achieved. That could come in late January when it publishes its full-year report.