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On Thursday, JPMorgan maintained its Underweight rating on Hennes & Mauritz AB (HMB:SS) (OTC: HNNMY) with a price target of SEK130.00. The firm anticipates a challenging earnings report for the company’s first quarter of 2025, which ends in February, with results due on March 27. Analysts at JPMorgan predict a year-over-year decline in earnings before interest and taxes (EBIT) of 19% to SEK 1.7 billion for the quarter. They also expect the company’s second quarter to see a 10% drop in EBIT year-over-year, positioning their estimates approximately 13% below the consensus for that period.
The forecasted decline in gross margin for the first quarter is more significant than the consensus, with JPMorgan expecting a drop of 160 basis points compared to the Infront consensus estimate of a 60 basis point decrease. This potential decline comes despite H&M maintaining a robust gross profit margin of 53.47% over the last twelve months. The firm’s full-year forecasts for 2025 remain unchanged but are below consensus, indicating a cautious outlook on the company’s financial performance. InvestingPro data reveals that two analysts have recently revised their earnings estimates downward for the upcoming period.
According to JPMorgan, the negative earnings momentum is likely to continue and become more apparent with the upcoming first-quarter report, leading to the decision to place H&M stock on Negative Catalyst Watch. The primary concern for the medium term is the lack of customer re-engagement with the H&M brand, which could pose further challenges for the retailer’s profitability and market position.
The maintained Underweight rating and the reiterated price target reflect JPMorgan’s stance on the stock ahead of the anticipated earnings report. Investors will be watching closely as H&M prepares to disclose its first-quarter results later in March, which will provide further insights into the company’s financial health and its ability to navigate a competitive retail landscape.
In other recent news, Hennes & Mauritz AB (H&M) reported a normalized earnings per share (EPS) of SEK3.11 for the second quarter, which was an improvement from SEK2.02 in the same period last year. However, this figure fell short of consensus estimates by SEK0.18. The company’s revenue for the quarter was SEK59.6 billion, up from SEK57.6 billion year-over-year, but still SEK166 million below expectations. Despite these challenges, H&M’s gross margin improved by 400 basis points to reach 54.0%, and the operating margin increased by 320 basis points to 8.1%.
CFRA analyst Zachary Warring maintained a Buy rating on H&M with a price target of SEK180.00, emphasizing the company’s strategic focus on operational efficiency. In contrast, RBC Capital downgraded H&M from Outperform to Sector Perform, adjusting the price target to SEK165.00 from SEK185.00 due to a cautious outlook on the company’s sales recovery timeline. RBC Capital noted that while H&M is revamping its brand in key cities and enhancing its digital presence, the overall sales recovery might take longer than anticipated. These developments reflect varied analyst perspectives on H&M’s current market positioning and future prospects.
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