H&M’s targets may call the peak on cost inflation
LONDON, March 30 (Reuters Breakingviews) - Sweden’s H&M (HMb.ST) seems to be turning the page on a painful few years. On Thursday, the $20 billion fast-fashion retailer said its sales rose by 3% year-on-year in the three months that ended in Feb. 28. Chief Executive Helena Helmersson expects the pace of annual growth to increase to 4% by the end of March. More importantly, she is now targeting a 10% operating margin in 2024.
To achieve that target, H&M will have to cut its soaring input costs. The retailer’s operating margin halved in 2022 to 3.2% as the price of cotton, freight, staff and energy costs ate up a larger share of its revenue. The Swedish retailer also had to bear the brunt of lost sales from its Russian shops, which it closed down following the country’s invasion of Ukraine.
Still, Helmersson’s optimism could also be seen as a pleasant surprise. Delivering a 10% operating margin next year would imply that she expects the worst to be over in terms of commodity-price inflation and a wider economic slowdown. H&M’s share price rose by 15% on Thursday. Investors seem to think the worst has passed. (By Aimee Donnellan)
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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
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