The clothing retailer H&M’s underlying earnings were only marginally better than expected in the third quarter, and the outlook for the fourth quarter is weak. Barclays says, highlighting a pressured gross margin and rising inventory as causes for concern.
Adjusted for tariff refunds, EBIT was around 1 percent above consensus, mainly thanks to good cost control.
The underlying gross margin fell simultaneously to 52.4 percent, below consensus at 53.3 percent. The bank expects continued pressure on the margin in the fourth quarter as well, partly due to adverse external factors.
Inventory simultaneously increased 9 percent in local currencies and amounted to 17.8 percent of sales over the past twelve months, compared with 16.4 percent a year earlier.
Barclays believes that the stock will underperform following the report and is being proven right, as it is currently down 3 percent.
