H&M warns on sales, shares slide

The fashion giant said net sales increased 3% in the three months to 31 May, while operating profits jumped to Swedish krona 7.1bn (£530m) from SEK4.7bn a year previously.

Daniel Erver, chief executive, said the group had achieved its best results "for many years" in the second quarter, "showing once more the H&M group’s strength and robust financial position".

However, investors opted to focus instead on the Swedish retailer's more downbeat take on current trading.

It warned that sales in June were set to fall by 6% year-on-year, dragged down by "unstable weather" and tough comparatives.

Erver, who took up the role in January, also acknowledged that conditions were likely to prove tougher during the second half. He said: "Our goal of an operating margin of 10% for the 2024 full-year remains in place.

"However, 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 that we expect on the second half."

As at 1115 BST, the stock had lost 13%.

Erver concluded: "The H&M group stands strong with a robust financial position, strong cash flow and improved profitability and sales.

"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."

H&M is the world’s second-largest listed fashion retailer after Spain’s Inditex, which owns Zara. It owns 4,338 stores across 77 markets globally.

But it faces a number of tailwinds, including higher costs and the popularity of low-cost rivals such as China’s Shein.

Russ Mould, investment director at AJ Bell, said: "H&M was in turnaround mode after going through a bad patch, but now it seems the journey back up the hill is going to be harder. Cost pressures and unfavourable foreign exchange rates have become a bugbear and that makes it harder to achieve its 10% operating margin goal in the near-term.

"While H&M is one of the best-known brands on the high street and online, it can never take the foot off the pedal."