H&M shares slump as trading was tougher than expected

H&M Hennes & Mauritz (HM-B.ST, OTC:HNNMY), described as the world’s second-largest ‘fast fashion’ retailer, saw its shares slump around 13% in Thursday’s trade after reporting lower-than-expected profits.

The Sweden headquartered retailer also gave investors a less-than-reassuring sales outlook predicting a 6% decline in the month of June, blaming poor weather in Europe.

Sales for its second quarter, up to the end of May, were up 3% year-on-year at 59.6 billion Swedish Krona (SEK), which equates to around $5.6 billion.

Operating profit for the quarter meanwhile amounted to  7.1 billion SEK or $672 million, which was below the forecasted 7.37 billion SEK.

The retailer also raised doubts about its ability to meet a full-year profit margin target of 10% - with the metric reported at 8.1% over the first half of year.

Chief executive Daniel Ervér acknowledged a need for sales growth to be “further strengthened”.

Meanwhile, referencing the 10% margin target, he commented: “the conditions for achieving that level this year have become more challenging as it is assessed that external factors that influence our purchasing costs and sales revenues, including materials and foreign currency, will have a more negative impact than we expected in the second half of the year.”

He added: “The situation in the world around us remains uncertain and households continue to have high living costs.

“As always, our top priority is to ensure the best value for money in each market.

“With a focus on our customers, committed colleagues and a faster pace of investment in the second half of the year we see good conditions for continued profitable, long-term and sustainable growth in a large and growing market.

In Stockholm, H&M shares closed down 12.97% at 169.40 SEK.