H&M Q2 out this morning. Q2 figures were clearly above our estimates with 3 % growth and a sharp increase in gross margin, however, they were well in line with the consensus. For June, company sees a 6 % decline in sales, which is obviously weak, and which the company attributes to tough comparisons and weather effects. Company reiterated its goal to reach 10 % EBIT margin this year, but added that it has become more challenging due to “external factors” ie. input costs, have become more negative in H2 than previously believed. It’s not a surprise that 10 % will not be reached this year as we have been around 8,5 % and consensus around 9 %, but comments regarding the future still look to be on the negative side in our view, even if we need to hike our 2024 estimates due to better than expected Q2. We also note that opex/sales ratio is not coming down much despite full effect of the restructuring efforts, leaving the improvement to be driven only by gross margin. We believe some of the gross margin strenght might be used to lower prices and hence drive sales going forward.

Yes, these external factors are typically things impacting the whole industry and it has been there for a few quarters already. For this year the outlook is still supportive in this respect, but one should also bear in mind the pricing component, where H&M has said prices will go down during this year, which obviously mitigates the margin support from lower costs.

H&M Q2 was released this morning, key points: Sales in local currencies were flat, just below our and consensus expectation of +1%, and reported sales declined 3 % also slightly below expectations Gross margin was 51,1%, very much in line with expectations and close to comparison period EBIT was only 3500 SEK, below all estimates. The company however says that winding down costs for Afound -chain and “long-term” marketing investments" totalled 550 MSEK, but even adjusting for that the earnings would have been below consensus, while inline with our estimate Looking forward, H&M expects September sales to be up as much as 11 %, which is clearly positive (we have 4 % for Q4 in total) The “external factors” as well as cost of markdowns are expected to have a negative impact to gross margin in Q4, while marketing costs will also be higher than in Q3 H&M says they estimate this financial year’s EBIT margin to be below their ambition of 10 %, which was well expected already with expectations around 8 % So overall very poor Q3 earnings, but partly due to one-offs and very nice sales pick-up in September, while margin pressure seems to continue in Q4

H&M redovisar resultatet för Q3’24 (juni-augusti) på torsdag. Vi förväntar oss att omsättningstillväxten blir något positiv i lokala valutor, men negativ i rapporterade termer. Vi förväntar oss att EBIT minskar jämfört med föregående år med en i stort sett stabil bruttomarginal och något högre opex med en negativ försäljningstrend som påverkar resultatet. Kommentar inför rapporten: Inderes H&M Q3’24 earnings preview: Weakening y/y development expected - Inderes H&M will report its Q3’24 (June-August) results on Thursday at 8:00 am CEST. We expect revenue growth to be slightly positive in local currencies, but negative in reported terms. We expect EBIT to decline y/y with a roughly stable gross margin...

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Vi tror att efterfrågan på HM har förblivit trög under Q3, samtidigt som företaget står inför flera motvindar vad gäller bruttomarginalen. Vi förväntar oss att detta kommer att resultera i ett svagare andra halvår än vi tidigare förväntat oss. Inderes H&M: We believe Q3 has been tough - Inderes We believe H&M’s demand has remained sluggish in Q3, while the company faces several headwinds on the gross margin. We expect these to result in H2 being weaker than we previously expected and have hence lowered our estimates for 2024-25.

Is this a trend in the whole industry atm? Have competitors reported about a similar phenomenon? I could, of course, do my own research, but I think you might have a better view on this.