Lucas has published a company preview report ahead of H&M’s Q2 report release on June 25th.
We believe H&M’s Q2 (March-May) revenue growth remained soft, driven by weak market data, reflecting declining consumer confidence and cold weather in April. As a result, we have revised our forecasts downwards. Nevertheless, we believe that supply chain efficiency, good operational cost control, and external margin supports will continue to bolster profitability in Q2. In our view, valuation levels remain elevated, and due to ongoing revenue concerns, we still consider the risk-reward ratio unattractive. Consequently, we reiterate our sell recommendation but lower our target price to SEK 150 per share (prev. SEK 155), primarily due to the lowered forecasts.
Lucas has published a new company report on H&M following the Q2 results
In our view, H&M’s Q2 report confirmed that the big picture remains unchanged: weak revenue development, but improved profitability driven by internal efficiency measures and external margin tailwinds. While we like margin-driven earnings growth, we continue to emphasize the importance of restarting revenue growth to achieve sustainable long-term earnings growth, especially as we expect margin tailwinds to subside in H2’26. We still consider valuation levels high due to ongoing revenue concerns, which were not eased by the modest guidance of flat growth for June. Against this backdrop, we continue to find the risk-reward ratio unattractive and reiterate our sell recommendation and 150 SEK target price for the share.
Here are Lucas’s pre-release comments ahead of H&M reporting its Q3 results on Thursday, September 24
We expect the company’s revenue to grow by only 1% in local currencies, reflecting ongoing challenges in brand appeal and an increasingly demanding market environment. We expect profitability to remain stable, although we see previous tailwinds that supported the gross margin fading and operational expenses increasing. The key items we are monitoring in the upcoming report are September sales and the margin outlook.
Here is the company report from Lucas following H&M’s Q3
In our view, H&M’s Q3 report once again confirmed that the overall investment case has remained unchanged: revenue growth is weak, but profitability has improved thanks to strict cost control and a one-off customs benefit. We continue to emphasize the importance of reigniting revenue growth to achieve long-term sustainable earnings growth, especially as margin tailwinds begin to fade. Considering ongoing growth concerns—which were hardly alleviated by September’s rather modest guidance of 1% growth in local currencies—we still consider H&M’s valuation to be elevated. Against this backdrop, we continue to find the risk-reward profile unattractive and reiterate our reduce (myy) recommendation and target price of 150 SEK per share.
