PARIS – H&M Group is shaking up its top management after successive quarters of flat sales.
In a statement issued Wednesday, the Swedish fast fashion behemoth announced chief executive officer Helena Helmersson will step down.
Daniel Ervér will succeed her as president and CEO, effective immediately.
The surpise announcement also shook investors, who sent the share price sliding ,8 percent at opening and just over 9.7 percent by mid-morning trading.
Helmersson had been with the company since 1997 and in the CEO role since 2020.
Ervér has been working in the group since 2006, most recently as head of H&M. He will continue in that role as well, and take on dual duties of the H&M flagship brand and the group.
“The board of directors would like to express a big thank you to Helena for her valuable contributions during a very intense time,” said H&M Group chair Karl-Johan Persson, noting that Helmersson had helmed the group through the pandemic and the Russian invasion of Ukraine.
The group subsequently closed its stores in Russia, which had been its sixth-largest market worth about $200 million in revenue.
“Daniel is a competent, experienced and respected leader and has the qualities needed to continue to develop the H&M group,” he added.
“I am both honored and very happy for the board’s confidence and motivated and humbled by the task. Together with all committed colleagues, we will continue to create unbeatable value for our customers and profitable growth. Our focus will be on offering our customers the best combination of fashion, quality, price and sustainability in an inspiring and attractive shopping environment,” said Ervér.
The announcement came as H&M Group’s sales were down 1 percent in local currencies in the fourth quarter, following two successive quarters of flat sales.
Sales over the busy holiday period did not boost its bottom line. In the period from Dec. 1 to Jan. 29, sales were down 4 percent in local currencies compared to the same period last year.
Sales in the three months from Sept. 1 to Nov. 30 totaled 62.65 billion Swedish kronor, or 5.55 billion euros at current exchange. That marked a 3 percent increase in Swedish kronor, compared to the same period last year.
The group, which has been intensifying its cost cutting measures, reduced its stock by 13 percent.
While cutting costs, the company has increasingly focused on improving its operating margin, with a goal of 10 percent by the end of 2024. It moved closer to that goal, with an operating margin of 6.9 percent in the fourth quarter.
Operating profit was slightly lower than analysts’ expectations, at 4.33 billion Swedish kronor, or 384 million euros at current exchange. Analysts anticipated fourth quarter operating profit to hit 4.7 billion Swedish kronor.
“Operating profit has been positively impacted by a stronger gross margin, the cost and efficiency programme, and good cost control,” said Helmersson.
Looking at the full year results, sales were up 1 percent in local currencies to 236.03 billion Swedish kronor, or 20.92 billion euros. That marks an 6 percent increase in Swedish kronor. The currency lost seven percent of its value against the euro in 2023.
H&M Group, which also operates Arket, Cheap Monday, COS, Monki, Weekday, & Other Stories and H&M Home, indicated that its portfolio brands were performing better than its flagship H&M label, noting that sales at other brands had increased by 9 percent in local currencies over the course of 2023.
“Our top priority is H&M, where our focus is on further enhancing the customer experience and the customer offering,” the company said in a statement. It is investing in AI and tech to “work on greater precision and shorter response times,” as well as omnichannel integration.
“H&M is very much in ‘trading sales for profits’ mode which is leading to margin improvement, but some pressure on volumes. As such, we think it may have to reinvest sourcing gains at some point to drive volume as it appears to be losing some [like-for-like] share in major markets,” said RBC analyst Richard Chamberlain in a note.
The group has the “challenge of capturing more midmarket fashion spend without compromising the value for money perception of the H&M brand,” he added.
The company has seen pressure from both sides.
Spanish rival Zara has increased its play in the fashion niche with high-end designer partnerships and the upscaling of its offer since the arrival of Marta Ortega Pérez as non-executive chair of parent company Inditex.
Ultra-fast fashion competitor Shein has been undercutting H&M on price as it readies for an IPO in the U.S.
The CEO change and lackluster results come just days after news that H&M plans to close 28 stores, or one-fifth of its retail estate, in Spain and lay off nearly 590 workers.
“This involves securing the best locations that resonate with our customers, enhancing the shopping experience in our existing stores, and actively seeking out new opportunities,” the company said in a statement confirming the closures.
In December, the company announced it will be opening a new concept store in London, which will be experiential and focused on “fashion forward products with elevating styling.”
