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Is the demand for fast fashion growing?

H&M, the world's second-largest listed fashion retailer, attracted more than expected shoppers in the first quarter of 2024

An H&M store in the Causeway Bay district of Hong Kong
An H&M store in the Causeway Bay district of Hong Kong (AFP)

Hennes & Mauritz AB posted better-than-expected profit in the first quarter as it cut costs and introduced new spring looks that proved more attractive to shoppers after a weak holiday season.

The Swedish retailer recorded operating profit of 2.08 billion Swedish krona ($196 million), with operating margin more than doubling from the year before. 

Shares of H&M jumped nearly 14% in early trading. The stock had fallen around 13% year to date before Wednesday’s update. 

The earnings update is the first for new chief executive Daniel Erver, who took over after Helena Helmersson left in a surprise move in January.

The onus is now on Erver to accelerate H&M’s turnaround as the company struggles to reduce stubbornly high inventory and reach double-digit margins by the end of the year. This comes at the same time it’s being outpaced by its biggest rival—Inditex SA-owned Zara—as well as new online challengers like China’s Shein.

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“We are fully focused on driving profitable growth going forward,” Erver said in the report, attributing the firm’s improved performance and profitability to “continued cost control, better precision in our collections and close cooperation with our suppliers.”

Quarterly revenue totaled 53.67 billion krona, slightly ahead of analyst consensus. Erver attributed the result to a gradual improvement in the quarter based on a successful spring collection.

Inventories fell 7% in the quarter, with operating profit margin reaching 3.9%, up from 1.3% the year before. Gross margin rose on supply-chain improvements and a cost and efficiency plan, the company said.

Erver’s predecessor Helmersson left the firm after four years at the helm, a tenure which saw her wrestling with the impact of the pandemic while facing criticism of the group’s fast-fashion business model and its environmental impact. 

Some investors initially expressed skepticism about Erver’s nomination, with analysts questioning whether the 42-year-old, who started at H&M as a summer trainee in 2005, could summon the firepower needed to bring about changes at the firm.

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