We believe H&M’s demand has remained sluggish in Q3, while the company faces several headwinds on the gross margin. H2 is set out to be softer than we previously expected, and we lower our estimates for 2024-2025. Analyst Rauli Juva summarizes.

We believe H&M’s demand has remained sluggish in Q3, while the company faces several headwinds on the gross margin. We expect these to result in H2 being weaker than we previously expected and have hence lowered our estimates for 2024-25.

H&M’s Q2 was strong as sales grew and EBIT improved y/y and topped our forecasts, although they were in line with the consensus. H&M, however, sees more headwinds in H2 than previously and hence its EBIT margin target of 10% looks more challenging for this year, according to the company.

H&M's first-quarter results were better than expected, mainly due to a higher gross margin. The revenue trend also seems to be turning positive again, which we find encouraging.

H&M reported its Q1'24 (Dec-Feb) results on this morning. Sales declined largely as expected, but earnings surprised positively thanks to stronger than expected gross margin improvement. Sales have developed positively in March, which is slightly better than our forecast.

H&M will report its Q1’24 (Dec-Feb) results on Wednesday at 8:00 am CET. We expect revenue to be down around 3% both in local currencies and SEK, but EBIT to improve significantly given the fairly weak comparison figures and support from gross margin improvement.