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H&M Slumps to Two-Year Low as War in Ukraine Clouds Outlook

All brands with revenues of greater than $100 million that transact in New York State are covered by the Act, which effectively means all major fashion brands, from Louis Vuitton to H&M.
Shoppers walk past H&M in London. (Shutterstock)

Shares fell to a two-year low after the Swedish owner of the H&M clothing chain reported a sudden slowdown in revenue growth due to the war in Ukraine and earnings that missed analysts’ estimates.

Sales rose 6 percent in local currencies in March compared with 23 percent growth in the three months through February, H&M said Thursday. The shares fell as much as 11 percent in morning trading, lopping $2.4 billion off the company’s market value.

The war and a resurgence of Covid in China are weighing on the prospects for retail, making the recent recovery short-lived and complicating H&M’s efforts to clear out a six-year inventory buildup. Chief executive Helena Helmersson, brought in just before the pandemic started, is facing an uphill battle to reach her goal of doubling sales by 2030. H&M is one of the first retailers to report such a slowdown from the war, and it may foretell warnings from competitors are coming, analysts said.

H&M may be “the canary in the coal mine,” wrote Adam Cochrane, an analyst at Deutsche Bank.

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The retailer has paused sales in Russia, its sixth-biggest market, accounting for about 4 percent of total revenue. H&M had 227 stores closed as of Wednesday, most of them in Russia, Belarus and Ukraine. Excluding those three countries, revenue rose 11 percent in March.

Pretax profit reached 282 million kronor ($30 million) in the three months through February, far short of the average analyst estimate of 1.05 billion. H&M said bigger investments in technology and the supply chain weighed on earnings.

H&M faces difficult competition as cut-rate discount upstart Shein gains online clients worldwide and Zara owner Inditex SA keeps expanding at higher levels of profitability. The company said it has closed 42 stores temporarily in China due to pandemic restrictions.

Helmersson was brought in to replace the grandson of H&M’s founder in January 2020 and started off by reducing the Swedish company’s store count.

Unsold Clothes

H&M’s inventory began to pile up in 2016, and the level exceeded $4 billion at the end of February. It edged up to 18.9 percent of 12-month sales at the end of November. H&M said about a sixth of the stock-in-trade is held to mitigate any supply-chain delays.

The retailer has a target of eventually reducing inventory to 12 percent to 14 percent of sales.

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H&M CEO Sets Target to Double Retailer’s Sales by 2030

Hennes & Mauritz AB chief executive Helena Helmersson set an ambitious goal of doubling the fast fashion retailer’s sales by 2030 after she reduced discounts and started clearing out the company’s longstanding inventory buildup.

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