H&M’s Stock Falls 5% as Q4 Sales Fall Short Of Expectations but Full-Year Profit Surpasses

H&M Hennes & Mauritz AB reported its financial results for the fourth quarter of 2024, revealing a mixed performance characterized by a slight increase in operating profit but a shortfall in sales expectations.

H&M posted an operating profit of 17.3 billion Swedish krona (approximately $1.57 billion) for the full year 2024, slightly exceeding analysts’ expectations of 17.2 billion krona. For the fourth quarter alone, the operating profit reached 4.6 billion krona, surpassing forecasts of 4.2 billion krona. The increase in operating profit can be attributed to effective cost management and a focus on online sales, which have become increasingly important in the retail landscape.

In contrast to the positive operating profit, H&M’s sales for the fourth quarter were reported at 62.19 billion Swedish krona, falling short of the anticipated 63.48 billion krona forecasted by analysts. However, this figure represents a 3% increase when measured in local currencies. Throughout 2024, total sales grew by 1% in local currencies, amounting to approximately 234.58 billion krona, indicating a modest recovery amid challenging market conditions.

The gross profit for the fourth quarter increased to 33.94 billion krona, leading to a gross margin of 54.6%, up from 53.7% in the previous year. This improvement in margin reflects H&M’s efforts to enhance profitability despite fluctuating sales.

H&M has faced intense competition from rivals such as Zara (owned by Inditex) and budget-friendly brands like Shein, which have pressured its market share and pricing strategies.
The company had previously abandoned its profit margin goals for 2024 due to rising costs and intensified competition, highlighting ongoing challenges in maintaining profitability.

The late timing of Black Friday sales in 2024 may have adversely affected sales performance during the critical holiday shopping period, contributing to lower-than-expected revenue figures. Despite these challenges, H&M’s focus on popular women’s fashion lines and robust online sales helped mitigate some negative impacts.

CEO Daniel Ervér took over in January 2024 with a mandate to revitalize H&M’s performance amid these challenges. His emphasis on cost management and strategic focus on core business areas is aimed at steering the company toward sustainable growth.