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H&M, the world’s second-largest listed fashion retailer, announced on Thursday that it is revising its full-year earnings margin goal downward after reporting a lower-than-expected operating profit for the June-August period. The company cited challenges such as high Inflation and tough competition from rivals like Zara and online retailer Shein.

Chief Executive Daniel Erver stated that the operating margin for this year is now expected to be lower than 10%, with the accumulated margin for the first three quarters standing at 7.4%. The company had previously set operating margin targets for 2022 and 2023 at 3.2% and 6.2% respectively, and had expressed difficulty in reaching the 2024 goal due to factors like material costs and foreign currency.

For the fiscal third quarter, H&M reported an operating profit of 3.51 billion Swedish crowns, falling short of analyst expectations. Despite the challenges, the company noted positive reception of its autumn collection, with sales for September expected to rise by 11% in local currencies compared to the previous year.

H&M’s shares have seen a 2.7% increase year-to-date, trailing behind the 33% rise of rival Inditex. This earnings report marks only the second under the leadership of CEO Daniel Erver, who took over in January.

($1 = 10.1443 Swedish crowns)

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