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We have trimmed our forecasts in terms of top-line growth and profitability for FY22 onwards.
Although the better-than-expected margin recovery during FY21 resulted in strong cash generation and enabled the group to set an ambitious long-term goal, the unpredictable impact of the Russian-Ukraine conflict and worsened inflationary environment are leading to a very challenging year ahead for fast-fashion retailers.
Companies: H & M Hennes & Mauritz (HM-B:STO)H&M Hennes & Mauritz AB Class B (HM.B:OME)
H&M published Q1 22 profit that was largely below consensus expectations, after releasing slightly better-than-expected top-line growth two weeks ago.
The resurgence of COVID-19 in some major markets and supply-chain challenges have visibly weighed on the group’s profitability.
Russia was one of the group’s most important growing and profitable market, accounting for 4% of group sales in 2021. The group has paused all its activities (online & offline) in Russia, Belarus and Ukraine, which will
After experiencing better-than-expected year-end trading, H&M has released a very ambitious long-term goal. The group is targeting to increase sales by 10-15% per year, doubling sales by 2030 (from the base line of SEK198.97bn).
The group also expects the operating margin to achieve 10% no later than 2024.
The updated long-term guidance was significantly ahead of the current market consensus and our expectations.
After publishing a slightly disappointing Q3 21 revenue two weeks ago, the group reported an encouraging improvement in the gross margin and a pre-tax profit well above the high-end of consensus expectations.
However, the supply disruptions have started to weigh on sales since September. Although the situation is improving, stock shortages in certain items may continue until Q4 21.
On the back of the small top-line miss, pre-tax profit was broadly in line with consensus and our expectations.
However, the continued store closures and reduced footfall have continued to drag down the pace of recovery. Group sales in the period 1-28 June were still below the level in 2019.
Also, the anger of Chinese consumers over XinJiang cotton has already dragged down sales by 28% in the country in Q2 21, and the situation remains complex there.
The ongoing pandemic has continued to weigh on the group’s business in Q1 21. Although the trading performance in March has shown a very encouraging sign, we should adopt a more cautious view on the Chinese boycotting storm.
H&M reported Q4 20 pre-tax profit that beat both consensus and our expectations. However, the improving trend of the group’s business was actually significantly impacted by the second wave of the pandemic, and the better profitability was mainly driven by the high amount of cost-savings and helped by government support (impacted selling expenses by c.SEK500m in Q4 20).
Given the current trading condition, Q1 20 is likely to be loss-making. However, the group’s accelerated development in online
Companies: H&M Hennes & Mauritz AB Class B
After publishing an encouraging Q3 trading performance two weeks ago (sales SEK50.9bn), the group has released its full Q3 report (June-August 2020).
The higher full-price sales and continued strong momentum in the online business have resulted in the pre-tax profit which is even better than preliminary guidance and revised consensus expectations.
The group aims to accelerate the transformation from offline to online by ramping up digital investment and a 5% reduction in its physical networks
H&M has reported its Q2 sales after releasing a brief trading update on 7 May (sales declined 57% yoy in the period 1 March – 6 May).
Despite Q2 sales being slightly above consensus and our expectations, the business recovery in the three remaining weeks of May was still below our estimates.
The continued social distancing and subdued consumer sentiment will continue to weigh on the group’s business for the rest of year.
H&M has reported a stronger than expected operating performance for Q1 20 (1 December 2019 – 29 February 2020). The group has limited exposure to China (<6%), so that early impact of the COVID-19 outbreak in China has been fully offset by the robust year-end sales in western countries.
However, as the COVID-19 is spreading worldwide, over 75% of H&M’s stores have been temporarily closed, sales in March have slumped by 46% and therefore the group is expecting a negative profit for Q2 20.
H&M has delivered strong and increasing profits for the first time after two years of declining margins. Lower markdowns and faster online growth have allowed for such an outperformance. The results are promising for a faster recovery.
The market momentum is improving at H&M. Sales growth accelerated in both Q2 and June, restoring confidence on the appeal of the brand’s collections.
H&M has accelerated its growth in Q2 to 6% at CER (4% in Q1). However, margins were down due to intensified restructuring actions. The operating margin was down 90bp and the operating profit decreased by 3.8% in H1. Sales in June are expected to grow by 12% at CER.
H&M has reported relatively good results in Q1, in line with our model and ahead of consensus. The gross margin was almost flat at 50%, boosted by lower markdowns. The operating margin decreased by 60bp and the operating profit came to SEK1bn. Sales in Q2 to date were up 7% at CER.
Group sales were up 4% at CER (+10% reported) to SEK51,015m. This translates a slight slowdown compared to the 6% reported in Q4. The Q1 19 results are due to be announced on 29 March.
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• Financial performance: Group revenue of £1,982.8m is +13.6% YOY and +41.3% versus FY20, representing significant market share gains versus global apparel markets that remain below pre-pandemic levels (UK: +27.3% versus market -3%, US +3.8% versus market -9%). The UK delivered a standout performance +27.3% YOY with strong growth across both established and new brands. Demand in international markets has been impacted by extended delivery times due to constrained airfreight capacity, a headwind
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H1 results confirm a strong recovery in store sales and a bounce back in profitability, benefitting from 26 weeks of uninterrupted trading. The Group is now debt free and has reinstated its dividend, with an interim distribution of 2.5p declared and scope for further special dividends and share buybacks.
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We publish our more detailed forecasts for Victoria following the FY trading update and completion of the carve-out and acquisition of the Rugs and UK Carpets division of Balta Group NV. FY2022E has been flagged with revenues in excess of £970m, underlying EBITDA in excess of £155m and underlying EBIT in excess of £100m. For FY2023E, management expect EBITDA in excess of £200m. Whilst demand into FY2023E has remained strong, the shares have weakened on thoughts of tightening consumer expenditure
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The Character Group (Character) reported a 22% year-on-year (yoy) increase in sales and an improvement in profits in the first half to February 2022, despite the ongoing impact of Covid in China (where most of the group’s manufacturing is conducted) and supply chain issues. Investment in finished goods has significantly increased to ensure product availability in H2 but the Group still generated operating cash, ending the period with net cash of £21.5m after a £13.6m share buyback.
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Zytronic’s interims confirm a continuing improvement in demand, driven by the Gaming and Vending sectors. This has driven a 24% increase in H1 revenue and a profitable outturn (PBT of £0.4m), on track for our full year forecast (SCMe: £1.0m) despite ongoing and well publicised supply chain challenges. Longer term recovery potential remains substantial and the Group is in excellent financial shape (net cash £7.5m post recent share buy-back programme).
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Accrol has delivered a robust trading update despite clear inflationary pressures on the business during the period. As a result, we are increasing our FY23 and FY24 revenue forecasts to reflect higher levels of activity and product inflation. Our headline earnings numbers remain unchanged following this update, albeit with growing confidence in FY23. We believe the shares look undervalued in what remains a strategically important player in the industry.
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A reassuring trading update confirms that SuperGroup continues to deliver attractive top-line growth. Admittedly, the superior wholesale performance means (as previously flagged by the company) that there is likely to be some gross margin erosion, but the focus on operational leverage should still ensure a modest improvement in operating margins going forward. Management’s commercial and pragmatic approach to expansion should mean continued success as the brand rolls out beyond its core markets
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FY21A Results were well flagged in November’s trading update. Today’s announcement reveals the Group is now debt free and reiterates its intention to return to the dividend list in the current period. Shoe Zone has a clear and well-defined plan to transform its store portfolio and grow its digital offer through its shoehub platform, which we believe will deliver a well-balanced retail model that can win market share and drive profitable growth.
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