Here are Rauli’s preview comments as H&M reports its Q4 results on Thursday.
We expect slightly positive revenue growth both in local currencies and reported terms. However, we expect EBIT to decline year-on-year due to a slightly lower gross margin and stable opex/ sales. We expect a positive top line development for the beginning of the fiscal year 2025.
Same in Finnish
Automatic translation: Original published in English on 27.1.25 at 8:53 AM. Please note that the automatic translation currently covers only text and may contain errors. You can provide feedback on the quality of automatic translations and potential errorshere.
We believe that the headwinds to gross margins, including price investments, increased markdowns, and negative impacts from external factors, have been stronger than earlier anticipated in H&M’s Q1 (Dec-Feb). As a result, we have lowered our earnings estimates. However, we still see earnings growth and dividends offering a good expected return, which, coupled with the declining valuation since our last research update (share price -9%), keeps the risk/reward ratio on the right side. Consequently, we reiterate our Accumulate recommendation but lower our target price to SEK 150 per share (prev. SEK 160) due to lower estimates.
Indeed, in connection with this report, the H&M responsibility transferred from me to Lucas in Sweden, so if you want to ask the analyst anything, it’s advisable to go to the Swedish forum in the future.
H&M’s Q1 earnings were weaker than expected, and we anticipate continued margin headwinds in Q2. However, we foresee revenue growth and a shift from gross margin headwinds to tailwinds starting in H2’25, leading to continued sales and margin improvements throughout 2026-27. We maintain our view that earnings growth and dividends offer a reasonable expected return and, therefore, reiterate our Accumulate recommendation with a slightly lowered target price of SEK 145 per share (previously SEK 150), reflecting lower short-term estimates.
We have updated our short- and medium-term forecasts for H&M in light of the potential tariffs, expectations of slower economic growth and escalating uncertainty. In our view, the short-term multiples reflecting this are not particularly attractive. We therefore change our recommendation to Reduce (was Accumulate) and lower our target price to SEK 130 per share (was SEK 145), mainly due to lowered estimates.
@lucas.mattsson has written a preview company report as H&M publishes its results next week on Thursday.
H&M will release its Q2/25 results (March-May) on Thursday, June 26th at 9:00 AM Finnish time. Although H&M’s turnaround is progressing, we believe its visibility in Q2 will be limited due to modest sales growth and continued headwinds in gross margins. We estimate that valuation multiples remain high, so we see little upside potential over a 12-month horizon. Therefore, we reiterate our Reduce recommendation and a target price of SEK 130 for the stock.
H&M’s Q2 results were largely in line with our operational expectations, and we made only minor upward adjustments to our short-term forecasts. The company’s performance and outlook suggest that a significant recovery will take time to materialize. In our view, short-term drivers remain weak, including low consumer confidence and slow margin recovery. As a result, we believe the stock is already priced sufficiently well for high earnings growth (2025e P/E: 20x). Therefore, we reiterate our Reduce recommendation and a target price of SEK 130 for the stock.
Quoted from the report:
For 2026-2027e, we believe the pace of margin improvement will be gradual, with revenue growth, coupled with continued cost efficiencies, driving an EBIT margin increase from 7.4% in 2024 to approximately 9% in 2027. While H&M continues to target a long-term EBIT margin of 10%, we do not expect this target to be met, given the highly competitive environment, which we expect will put pressure on pricing power over time.
Here are @lucas.mattsson’s pre-comments as H&M releases its Q3 results next Thursday.
We have made slight forecast adjustments to H&M’s short- and medium-term forecasts due to a slower-than-expected recovery. While we acknowledge that external factors affecting the gross margin have developed positively, we believe short-term drivers will remain weak, with concerns about revenue development and an uncertain business environment. Since our last update after the Q2 report, the share price has risen by approximately 15%, which has increased absolute valuation multiples (2025e P/E: ~24x) and left limited room for disappointment. As a result, we are changing our recommendation to Sell (previously Reduce), but reiterate our target price of SEK 130 for the share.
H&M’s Q3 results exceeded both our and consensus expectations, and it is clear that the company is taking steps in the right direction. While the improvement in profitability was strong this quarter, sales growth remains modest, which we consider critical for a more sustainable profitability recovery. Therefore, we would like to see a consistent trend of improvement before we can state that a sustainable profitability recovery is underway. Furthermore, we believe the valuation has risen to a high level. Given ongoing concerns about revenue growth and uncertainty regarding the sustainability of profitability improvements, we still consider the risk-reward ratio unattractive. As a result, we reiterate our Sell recommendation but raise our target price to SEK 140 (previously SEK 130) per share, mainly due to raised forecasts.
Hi! My name is Lucas, and I cover H&M, among other things. Since our forum has now switched to multilingual mode, you can ask me questions, and I will participate in the discussion here.
Below is news on how H&M is launching a SEK 1 billion share buyback to return money to shareholders and at the same time tidy up its capital structure.
The program is, however, small, i.e., only about 0.4% of the company’s value and concerns B-shares. According to the article, the debt level is still within the target range.
Here is a pre-earnings report from Lucas, as H&M releases its Q4 results on January 29.
We believe consumer demand remained soft in H&M’s Q4 (September-November), although supply chain efficiencies and external margin tailwinds should support profitability. We have lowered our earnings estimates for 2025 and subsequent years, but margins remain largely unchanged, reflecting our confidence that H&M will maintain strong cost discipline. We still see the stock as expensive at current valuation levels and reiterate our sell recommendation.
