June 20, 2024

H&M CEO Abruptly Resigns Amid Sales Slump and Increased Competition

Written by AiBot

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Feb 1, 2024

H&M CEO Helena Helmersson has abruptly resigned after just two years in the role, the company announced on January 31st, 2024. Her resignation came as a surprise and coincided with H&M reporting weaker-than-expected quarterly sales as it struggles to adapt to increasing competition from online-focused rivals.

Sales and Profits Disappoint as Competition Mounts

H&M said Helmersson was leaving the CEO position by “mutual agreement” and would be replaced by the head of brand, Daniel Ervr. The fast-fashion giant has seen sales growth stagnate in recent years as consumers shift more of their spending towards newer online brands like Shein and Boohoo.

The company reported a 3% drop in fiscal fourth-quarter sales at the start of 2023 in local currencies – falling short of analysts’ forecasts. It also posted a 60% plunge in quarterly pretax profit which missed expectations.

H&M largely blamed the disappointing results on the impacts of the COVID pandemic, supply chain issues, soaring production costs, andellants markdowns needed shift unsold products during a “very demanding year.”

But beyond those one-off issues, analysts pointed to more worrying long-term trends for the formerly fast-growing retailer. Its brand seems to have fallen out of favor, especially among younger shoppers, at the same time as leaner digital competitors have been winning market share.

“Increased competition and insufficient brand attractiveness is proving an unhealthy cocktail,” said Danske Bank analyst Daniel Schmidt.

Key Figures
Q4 Pre-Tax Profit SEK 564M, down 60% YoY
Q4 Sales SEK 60.9 billion, down 3% YoY
FY 2023 Outlook Sales growth of 0-3% in 2023, pretax profit margin of 7-9%

New CEO Faces Uphill Battle to Reignite Growth

Incoming CEO Daniel Ervr will face significant challenges in turning around H&M’s fading growth trajectory in an increasingly crowded and competitive market.

The middle-market chain is losing appeal rapidly among Gen Z consumers compared to ultra-fast fashion brands which leverage social media influencers and lightning-quick inventory turnover. It must find a way to make its brand more aspirational and responsive to shopping trends.

At the same time, H&M remains over-exposed to physical stores and needs to accelerate its push into e-commerce and digital channels.

“The new CEO has a monumental task ahead of him,” according to Bloomberg Intelligence analyst Diana Gomes. “Brand appeal is diminishing at a time when competition keeps increasing. H&M risks falling into obscurity if it can’t find a new growth engine.”

To revive sales growth, Ervr will need to oversee a digital transformation of H&M’s operations and potentially consider revamping pricing. The company admitted it struggled partly due to a high inventory backlog, indicating it may have misjudged demand trends and needs more predictive analytics capabilities.

“We remain confident about the H&M group’s ability to boost profitability over time, but the lacklustre top-line growth trajectory looks unlikely to turn around soon in an increasingly penetrated apparel market,” wrote Morgan Stanley.

Surprise CEO Switch Raises Investor Uncertainty

Helmersson had been CEO for just two years after succeeding Karl-Johan Persson, grandson of H&M’s founder Erling Persson, who had run the company for a decade. She was the first female chief executive of the retailer which started in Sweden in 1947.

Her shock departure and the immediate appointment of an insider replacement rattled investors amid fears it suggests deeper issues plaguing the company. Management continuity is now a major question mark during an already uncertain consumer environment.

H&M’s shares plunged 8.3% during early trading on January 31st following the announcement, wiping nearly $2 billion off its market value. Its stock price has lagged the broader European retail sector by over 40% during the past two years.

Analysts were caught off guard by Helmersson’s sudden exit and pointed to it as a sign H&M needs more urgent strategic changes to revive growth in the face of shifting consumer demand.

“The abrupt leadership change raises some red flags,” said Danske Bank’s Schmidt. “We read it as an indication that quicker action is needed to address the growth challenges and reverse market share losses.”

Outgoing CEO Cites Heavy Workload

In a statement, Helmersson cited an extremely demanding CEO role over the past two years navigating global economic upheaval including soaring inflation, supply chain bottlenecks, and fallout from the Ukraine war.

“The last years have been exceptionally challenging with the pandemic, increased cost inflation, and a shifting retail landscape,” she said. “Travel restrictions have also taken up a lot of time away from my family so when the board asked me about succession alternatives we came to the mutual agreement that this was the right time to hand over to Daniel.”

But her comments failed to dispel the notion of dissatisfaction from H&M’s board over the company’s worsening position in the fashion market. Analysts instead believe Helmersson is “taking the fall” for fundamental issues plaguing the fast-fashion pioneer.

“While Helmersson points to workload and personal factors, its quite convenient timing for a change-up given the weak operating backdrop,” according to Bank of America. “Her departure hints at tensions behind the scenes on how to address stagnating sales.”

Helmersson’s Tenure (January 2022 – January 2024)
Sales Growth* – 1%
Net Profit Margin Declined from 4% to 2%
Share Price Change – 27%

*compound annual rate

Outlook Remains Gloomy with No Quick Fix

H&M warned investors not to expect a rebound anytime soon, predicting flat sales growth at best in 2023 alongside further margin pressure. It faces still extremely high energy, logistics and materials costs which are squeezing profitability.

The company also flagged that industrial action and geopolitical tensions could continue hampering global supply chains and inventory flows over the coming year.

Analysts said H&M’s outlook remained among the most downbeat across European apparel retail which faces weakening consumer demand. Rebuilding profitable growth depends on enticing shoppers back to stores and its websites.

“H&M’s financial messaging was overtly gloomy,” said RBC analyst Richard Chamberlain. “We expect stagnation to remain the norm until brand perception improves, and there is little visibility on that front.”

Without a clear roadmap from the new leadership team, nervous shareholders may pressure the company to consider more aggressive moves like a major strategic review or shakeup of its diversified stable of brands.

For now, all eyes will turn to incoming chief Ervr to map out his vision for reviving the company’s faded glory when H&M reports full fiscal year results in six weeks time. The newly elevated CEO will need to quickly formulate and communicate decisive actions to turn around worsening market share trends in the cutthroat fast fashion space.




AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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