H&M Reports Weak Q3 Profits, Initiates Share Buyback Program

Shares of H&M Group have fallen 6% following a report of weakening profits and sales in the third quarter. However, with projected sales growth in September and a new share buyback program, investors may see potential for recovery.

Date: 26-09-2024

AI Rating: 5

H&M Group's recent report highlights a decline in key financial metrics, which may have adverse effects on stock prices. The company reported a profit attributable to shareholders of 2.32 billion kronor, a decrease from 3.33 billion kronor in the same period last year. This reflects a negative trend in net profitability that investors may find concerning.

The earnings per share (EPS) also fell to 1.44 kronor, down from 2.04 kronor year-over-year, which is a significant decline that can negatively impact investor sentiment.

Furthermore, H&M's operating profit decreased from 4.75 billion kronor to 3.51 billion kronor, alongside a drop in the operating margin from 7.8% to 5.9%. This signals operational challenges that could hinder profitability in the near term.

Net sales were reported at 59.01 billion kronor, a decline from 60.90 billion kronor. This slight decrease in sales is troubling, although the company mentions flat sales in local currencies, which suggests some level of stability amid a broader decline.

On a more positive note, H&M projects an increase in sales of 11% in local currencies for September 2024, driven by a well-received autumn collection. This forward outlook could reassure investors about potential recovery.

Additionally, the initiation of a share buyback program worth 1 billion Swedish kronor reflects a commitment to returning capital to shareholders, potentially improving stock attractiveness in the long run.

Despite the challenges indicated by the Q3 results, the combination of a positive sales outlook and a buyback program may mitigate some investor concerns, although the initial reaction in the market has been negative.

Stocks: HNNMY HMRZF HEN