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H&M shares tumble as CEO steps down

AFP . Stockholm
31 Jan 2024 18:56:09 | Update: 31 Jan 2024 19:27:01
H&M shares tumble as CEO steps down
— AFP File Photo

H&M chief executive Helena Helmersson announced Wednesday she was stepping down, sending shares in the fashion retailer tumbling as the Swedish company also reported lower-than-expected profits in the fourth quarter.

Helmersson, who has spent 26 years at the company and the last four at the helm, said the job had been "very demanding at times for me personally" after navigating through the "pandemic, and several geopolitical and macro-economic challenges."

She will be replaced by 42-year-old Daniel Erver, who has worked for the group for 18 years in various roles and most recently as head of the H&M brand.

H&M's shares plunged by nine per cent on the Stockholm stock exchange after the announcement.

During Helmersson's tenure, the company's share price has fallen by almost 20 per cent, from 207 kronor in 2020 to 168 kronor ($24.40), the closing price on Tuesday.

The group, the world's second biggest fashion retailer after Zara owner Inditex, posted a net profit of 8.75 billion kronor ($840 million) in 2023, a 2.5-fold increase from a year earlier, citing higher sales and improved margins.

"Our improvement work in the supply chain and continued normalisation of the external factors that influence purchasing costs resulted in a stronger gross margin," Helmersson said in the earnings report.

"For many consumers the year was marked by lower purchasing power because of high inflation and high interest rates. Despite this, our net sales in comparable markets increased in relation to 2022," she added.

Missed expectations

Net sales rose by six per cent for the full year to 236 billion kronor.

But in the fourth quarter, the fashion giant reported a four per cent drop in net sales in local currencies.

H&M's net profit in the fourth quarter reached 1.58 billion kronor, up from a net loss of 864 million kronor a year earlier.

But it fell far short of analyst expectations of a profit of 3.12 billion kronor, according to a Bloomberg survey. 

Operating profit for the year more than doubled to 14.5 billion kronor, corresponding to an operating margin that almost doubled during the period, from 3.2 to 6.2 per cent.

The company's fiscal year runs from December to November.

In 2022, the company's withdrawal from Russia after Moscow's invasion of Ukraine and a cost-cutting programme cost it almost 2.6 billion kronor.

The group, whose other brands include COS, Arket, & Other Stories and Monki, said it saw "good conditions for continued profitable and sustainable growth in 2024."

H&M said that, as of November 30, it had 4,369 stores around the world, 96 fewer than a year earlier.

The average number of employees "converted into fulltime positions," was 101,103 at the same time, a reduction of about 5,000 compared to a year earlier.

It also said it aims to "increase sales by 10–15 per cent per year with continued high profitability."