H&M will report its Q2’24 (March-May) results on Thursday at 8:00 am CET. We expect revenue to be flattish in local currencies, but EBIT to improve clearly, supported by both gross margin improvement and lower opex. The company has said its targeting 10% EBIT margin in 2024, which looks optimistic to us as we expect only 7.9%, while the consensus is at 8.9%.

Revenue expected to grow slightly

We expect H&M’s revenue in local currencies to be flattish and to grow some 1 % in SEK with modest growth in all regions. Consensus is expecting 3% growth in SEK. The growth figures have been flat or negative for the last four quarters, so in our view the comparison figures are not challenging.

Margins expected to continue improving

H&M's margins were already at a decent level in the comparable period, but we see further gross margin improvement, albeit to a much lesser extent than the consensus. This is supported by easing pressure from external costs, which we believe could be partially mitigated by lower prices. H&M's efficiency program should also help keep opex/revenue on a declining trend. Overall, this supports an EBIT margin improvement of more than 2pp in our forecasts, while the consensus expects an improvement of around 4pp.

10% EBIT margin target for 2024 continues to look challenging

H&M does not give financial guidance but has said that it aims for an EBIT margin of 10% in 2024. We forecast an EBIT margin of 7.9% in 2024, so we would not be surprised to see more cautious comments around the margin target, although getting at least close to it is still within reach with good execution. The cost and margin environment in 2024 looks quite stable, which we see as supportive for H&M’s expected margin improvement. We are expecting flattish sales development in local currencies in 2024 so the revenue growth needs to pick up after the decline in Q1.