H&M Reports Lower Profits Despite Rising Sales in Q1

H&M reports disappointing profit despite a rise in net sales. The company saw net earnings drop to 590 million kronor this quarter, down from 1.24 billion kronor last year. With a >3 percent decrease in operating margin, investor sentiment may be affected.

Date: 27-03-2025

AI Rating: 4

Earnings Per Share (EPS)
Earnings per share for H&M fell to 0.37 kronor, down from 0.77 kronor a year ago. This significant drop indicates a weaker financial performance relative to the same period last year, which investors typically view negatively.

Net Income
Net income attributable to shareholders decreased sharply to 590 million kronor from 1.24 billion kronor. Such a decrease in net income might raise concerns about the company's profitability and ability to generate value for shareholders.

Operating Profit and Margin
Operating profit also saw a decline to 1.20 billion kronor from 2.08 billion kronor. The operating margin dropped to 2.2 percent from 3.9 percent the previous year. This decline in profit margins can signal rising costs or decreased pricing power, which could negatively affect investor outlook.

Net Sales Growth
On a more positive note, net sales grew by 3 percent to 55.33 billion kronor, indicating some resilience in market demand. However, the growth in net sales was modest compared to the sharp drop in profits and margins, which may lead investors to focus on the negative aspects.

Future Outlook
Looking ahead, H&M expects sales to increase by 1 percent in local currencies in March, which might be perceived as a sign of recovery. However, the anticipated increase in markdown costs may also dampen profit expectations for the coming quarter.

In summary, while H&M has reported an increase in sales and positive developments in certain regions, the substantial decline in profits, EPS, and operating margins raises concerns for investors, potentially impacting stock performance moving forward.

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