In the past week Stefan Persson, the chairman of H&M, has purchased shares in the fashion retailer to a value of SKr 2.3 billion. Despite this, the mood on the stock market is sour and H&M shares have tumbled by 32% in the past two years. The reason for the slide is said to be the surge in online sales.
“H&M mainly sells its clothing and accessories in shops, and we are seeing in-store sales drop across Europe due to the increase in online sales,” comments Christopher Lyrhem, SEB share strategist.
Clothing giant H&M’s AGM on Wednesday was the ninth under Karl-Johan Persson as CEO. He is now one of the longest serving CEOs on the OMXS30. However investors with shares in H&M during his steerage have made a bad deal. The shares have had an annual total return of under seven per cent, which is eleven percentage points lower than the annual return of the Stockholm stock market total return index, SIX Return.
To boost confidence institutional owners want DI to report more information about the progress of the company’s concept brands (see SPR 10/5 Early Ed.). Neither chair Stefan Persson or CEO Karl-Johan Persson gave interviews at the AGM, but Karl-Johan Persson said, “We listen to good ideas, take them in and discuss whether we can do better. It is always a balancing act. We think that it is most important for the shareholders that we have lots of focus on the customers and the business. We have annual and biannual press conference when I meet investors and analysts.”
Weak sales in March and swelling stocks took the edge off a result that for H&M was surprisingly positive. One of the pieces of news in H&M’s quarterly report was that the company is adding another concept to its portfolio when it opens the first store under the brand Arket in London, along with online stores in 18 European countries.
CEO Karl-Johan Persson explains that when something new is developed, as with COS and & Other Stories, there are initial high costs but, for example, COS now has a turnover of over 10 billion kronor. “The prices in Arket are around the same level as COS and Stories, with a major focus on quality. We have a great team here in Stockholm and have worked on this for a year and a half. It is not like any of our other concepts,” says Persson.
H&M has had a tough start to the year, 4% growth in local currency during the first quarter and 7% in March. However Persson says the company is still aiming for its goal of 10-15% growth per year. He says it has become more difficult but the operating margins could still increase. Addressing online issues, Karl-Johan Persson says, “I think that it is a misunderstanding that we are falling behind online… The model is working, even if we could develop it further.”