H&M

In our view, H&M’s Q1 report did not contain any major surprises. The overall narrative remains unchanged; the company continues to struggle to drive sales growth, while margin improvement is primarily supported by internal initiatives and external factors rather than top-line momentum. In our view, valuation levels remain elevated, and given the ongoing revenue concerns, we continue to view the risk/reward as unattractive. As a result, we reiterate our Sell recommendation and our target price to SEK 155 per share.

We believe revenue growth has remained soft in H&M’s Q1 (Dec-Feb), and we have therefore revised down our revenue estimates slightly. However, we still believe that supply chain efficiencies, good operational cost control and external margin tailwinds should continue to support profitability. In our view, the valuation levels are still elevated, and, given the ongoing topline concerns, we still view the risk/reward as unattractive. As a result, we reiterate our Sell recommendation and target price of SEK 155 per share.

H&M’s Q4 earnings surprised on the upside again, which makes us more confident that a gradual margin recovery is taking shape. While the operational cost control was strong this quarter, sales growth remained modest, something we view as critical to reach its long-term margin ambitions. In our view, the valuation levels are still elevated, and, given the ongoing topline concerns, we still view the risk/reward as unattractive. As a result, we reiterate our Sell recommendation but increase our target price to SEK 155 per share (prev. 140 per share), mainly due to increased earnings estimates.

We believe consumer demand has remained subdued in H&M’s Q4 (Sep-Nov), although supply chain efficiencies and external margin tailwinds should support profitability. We have lowered our earnings estimates for 2025 and beyond, but margins remain broadly intact, reflecting our confidence that H&M will continue to demonstrate strong cost control. We continue to see the share as expensive at current valuations and maintain a Sell recommendation.