Profits up at H&M but challenging sales growth remains
Robyn Duffy, Consumer Markets Senior Analyst at RSM UK, comments on H&M’s Q3 nine-month report: “H&M is becoming a more profitable retailer, but accelerated growth is yet to come. September's expected 1% increase in sales in local currencies suggests that, despite improving momentum towards the end of the quarter, underlying demand remains relatively flat, mirroring Q3’s results.
“H&M's turnaround is increasingly visible in the bottom line, with tighter buying, better cost control and operational efficiencies driving a significant improvement in profitability over the past nine months. But the next leg of the recovery needs to come from stronger sales growth.
“The challenge is defining exactly where H&M sits in an increasingly competitive fashion market. At one end, Zara continues to compete on fashion-led design and speed, while at the other, Shein and Primark have set an extremely high bar on price and perceived value. The emergence of Lefties also shows Inditex pushing harder into the value end of the market.
“That leaves H&M fighting across several fronts and trying to be everything to everyone is unlikely to be enough to accelerate growth. There is an opportunity to create much clearer differentiation between its value proposition and its more aspirational, fashion-forward offer.
“H&M's profitability is moving in the right direction but now it needs to be braver about defining what it wants the brand to stand for, so there’s a clearer customer proposition.”