H&M has warned of a slowdown in recent winter sales even as cost controls helped the fast-fashion retailer record better-than-expected results for the fourth quarter in what it called a "challenging environment".
H&M has struggled to accelerate sales as consumers rein in spending, with cut-price online retailers like Shein now competing for its price-sensitive customers and rival Inditex's Zara dominating the upmarket end of fast fashion.
The Swedish retailer's operating profit in the September-to-November quarter, which includes Black Friday, rose 38% from a year earlier to 6.36 billion crowns ($724m), beating an LSEG analysts' poll forecast of 5.53 billion crowns, and its operating margin widened to 10.7% from 7.4%.
During his two years on the job, CEO Daniel Erver has sought to improve profitability, partnering with pop stars to make H&M trendier and tightening cost control.
H&M's stock has risen 31% over the past six months supported by a recovery in margins. But analysts say Erver must now show he can also reignite sales.
"It doesn't feel like they've really got their sales growth sorted out yet," said Inderes analyst Lucas Mattsson, while adding that rebounding margins were, nevertheless, a positive sign.
Erver told analysts and media today that H&M was not yet where he wanted it to be in terms of brand perception, but that it was moving in the right direction.
"I am not satisfied with the sales development, and I see potential for further sales growth going forward," he told Reuters, adding H&M still had measures it planned to get off the ground.
The company needed to gain a more precise understanding of what customers want and bring those products to market more quickly, he said.
While local-currency sales grew 2% in the quarter, they dropped 2% in December and January, the company said, pointing to calendar effects.
Chief Financial Officer Adam Karlsson said lingering weak consumer confidence, particularly in some European markets, may increase the need to offer discounts this quarter.
H&M also said it expected trade tariff costs to rise.
H&M today proposed a dividend of 7.10 crowns per share, up from 6.80 crowns and above an expected 6.83 crowns.
