Hennes & Mauritz is a retail chain. The range consists of clothing, shoes, and accessories. The group also includes brands such as COS, Monki, Weekday, Cheap Monday, and Other Stories. Today, the company also conducts business in home furnishings via H&M Home. The company has a presence in all global regions. H&M was originally founded in 1947 and is headquartered in Stockholm, Sweden.
H&M’s Q2 results were operationally largely in line with our expectations, and we made only minor upward revisions to our short-term estimates. The company’s performance and outlook suggest that a meaningful recovery will take time to materialize. In our view, short-term drivers remain weak, including low consumer confidence and a slow margin recovery. As a result, we believe that the stock is already sufficiently priced in for high earnings growth (2025e P/E: 20x). Therefore, we reiterate our Reduce recommendation and target price of SEK 130 per share.
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H&M will report its Q2’25 (March-May) results on Thursday, June 26th, at 8:00 am CET. While H&M is progressing through its turnaround, we believe there will be limited visibility of this in Q2, due to modest sales growth and continued headwinds to gross margins. In our view, the valuation multiples are still on the high side, and we therefore see little upside on a 12-month horizon. As a result, we reiterate our Reduce recommendation and target price of SEK 130 per share.
We have updated our short- and medium-term forecasts for H&M in light of the potential tariffs, expectations of slower economic growth and escalating uncertainty. In our view, the short-term multiples reflecting this are not particularly attractive. We therefore change our recommendation to Reduce (was Accumulate) and lower our target price to SEK 130 per share (was SEK 145), mainly due to lowered estimates.
As the US escalates its trade war with new tariffs on imported goods, we see rising risks of continued margin pressure for H&M. While competitors are similarly affected, the scale of these new tariffs will likely be difficult for H&M to fully pass on to customers, at least not immediately. That said, there are still many uncertainties, and the situation remains fluid.
H&M's Q1 earnings were weaker than expected, and we anticipate continued margin headwinds in Q2. However, we foresee revenue growth and a shift from gross margin headwinds to tailwinds starting in H2’25, leading to continued sales and margin improvements throughout 2026-27. We maintain our view that earnings growth and dividends offer a reasonable expected return and, therefore, reiterate our Accumulate recommendation with a slightly lowered target price of SEK 145 per share (previously SEK 150), reflecting lower short-term estimates.
We believe that the headwinds to gross margins, including price investments, increased markdowns, and negative impacts from external factors, have been stronger than earlier anticipated in H&M’s Q1 (Dec-Feb). As a result, we have lowered our earnings estimates. However, we still see earnings growth and dividends offering a good expected return, which, coupled with the declining valuation since our last research update (share price -9%), keeps the risk/reward ratio on the right side. Consequently, we reiterate our Accumulate recommendation but lower our target price to SEK 150 per share (prev. SEK 160) due to lower estimates.
H&M's Q4 results beat our forecasts thanks to a strong gross margin. However, we kept our estimates largely intact and continue to see sales and margin improvement in 2025-26. We see earnings growth and dividends offering a reasonable expected return.
H&M will report its Q4’24 (September-November) results on Thursday at 8:00 am CEST. We expect slightly positive revenue growth both in local currencies and reported terms. However, we expect EBIT to decline year-on-year due to a slightly lower gross margin and stable opex/ sales. We expect a positive top line development for the beginning of the fiscal year 2025.
We believe consumer demand has remained subdued in H&M’s Q4 (Sep-Nov), although the strong September should support growth. We have lowered our margin assumptions for 2025 and beyond.
