H&M investor dumps shares
• Pressure on fashion retailer to put profit before growth
One of H&M’s largest shareholders has lost its patience. Skandia’s actively managed funds have spent the past months selling off most of their stake in the fashion retailer after watching it struggle with weakening sales in its physical stores and intensifying online competition.
One of H&M’s biggest shareholders has lost its patience.
The actively managed funds of Skandia spent recent months selling off most of its stake in Hennes & Mauritz after watching the fashion retailer struggle with weakening sales in its physical stores and intensifying online competition.
The Swedish savings and insurance group says that H&M has to tackle a lot of issues before it will consider investing again.
“There’s so much they need to do that I don’t think they’ll solve this quickly,” said Erik Sjostrom, who oversees more than $3bn as a senior portfolio manager at Skandia. H&M sank more than 30% in 2017. It was down about 8% after falling 1% in late-morning trade in Stockholm on Monday, hitting its lowest level since March 2009.
Sjostrom said the world’s number two fashion chain by sales (after Zara-owner Inditex) should start prioritising profitability over growth and present a credible plan for tackling online competition. It also had to cut its dividend, cut the number of its stores in mature markets and focus on getting its product mix and price levels right.
He said it also had to reduce or write off excess inventory that got in the way of new trends hitting its shelves.
H&M has said it is confident it can fix its “disappointing sales”. Management is working on building an online presence, creating new brands, improving its shops and fixing inventory issues with better technology.
H&M’s problems stem partly from its slowness in adapting to a digital age in which consumers increasingly shop online.
As recently as a year ago, its main target was to grow its physical store network 10%-15% a year. As it became clear that more shoppers wanted to make purchases online, H&M changed that goal to aim instead for yearly sales growth of 10%-15%, including online commerce.
While its digital sales have increased, H&M still faces stiff competition from multibrand and free shipping platforms such as Zalando and Asos. Analysts appear to be losing patience. Of those who provide their H&M ratings data to Bloomberg, 51% are now advising clients to sell the shares. That’s the most negative overall analyst view since at least early 2003. The average 12-month analyst price target has dropped to the lowest since early 2009.
Skandia’s funds including its index-tracking funds sold 1.26-million H&M shares in the past year and they now hold 2.87-million shares, or 0.2% of the share capital.
Sjostrom said that Skandia’s actively managed funds had “almost nothing left” in H&M. The fund manager that said he was not likely to start buying again until H&M showed it understood the new market.