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H&M Abandons 2024 Earnings Margin Target, Q3 Profit Lags

People walk past a closed H&M clothing store in Omsk, Russia, March 3, 2022. REUTERS/Alexey Malgavko
People walk past a closed H&M clothing store in Omsk, Russia, March 3, 2022. REUTERS/Alexey Malgavko
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H&M Abandons 2024 Earnings Margin Target, Q3 Profit Lags

People walk past a closed H&M clothing store in Omsk, Russia, March 3, 2022. REUTERS/Alexey Malgavko
People walk past a closed H&M clothing store in Omsk, Russia, March 3, 2022. REUTERS/Alexey Malgavko

H&M, the world's second-largest listed fashion retailer, said on Thursday it no longer expected to reach its full-year earnings margin goal, while reporting a lower-than-expected operating profit for the June-August period.

H&M has struggled to boost its profitability amid high inflation and stiff competition from its bigger Spanish rival Zara, owned by Inditex, and the rapid growth of cut-price online fast-fashion retailer Shein.

"At present we estimate that this year's operating margin will be lower than 10%," Chief Executive Daniel Erver said in a statement.

The accumulated margin stood 7.4% for the first three quarters.

The full-year operating margins for 2022 and 2023 were 3.2% and 6.2% respectively, and H&M had cautioned in June that factors such as materials costs and foreign currency had made the 2024 target more difficult to reach.

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Fashion

Uniqlo Risks Boycott in China after CEO's Xinjiang Comment

People shop at a UNIQLO store during the grand opening of the The Hudson Yards development, a residential, commercial, and retail space on Manhattan's West side in New York City, New York, US, March 15, 2019. REUTERS/Brendan McDermid
People shop at a UNIQLO store during the grand opening of the The Hudson Yards development, a residential, commercial, and retail space on Manhattan's West side in New York City, New York, US, March 15, 2019. REUTERS/Brendan McDermid
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Uniqlo Risks Boycott in China after CEO's Xinjiang Comment

People shop at a UNIQLO store during the grand opening of the The Hudson Yards development, a residential, commercial, and retail space on Manhattan's West side in New York City, New York, US, March 15, 2019. REUTERS/Brendan McDermid
People shop at a UNIQLO store during the grand opening of the The Hudson Yards development, a residential, commercial, and retail space on Manhattan's West side in New York City, New York, US, March 15, 2019. REUTERS/Brendan McDermid

Casual wear giant Uniqlo is facing calls for a consumer boycott in China after the CEO of the clothing company's owner said it does not source cotton from China's Xinjiang, which has faced allegations of forced labor in recent years.
Fast Retailing CEO Tadashi Yanai made the comment during an interview in Tokyo with the British Broadcasting Corporation that was published on Thursday.
Two hashtags on Yanai's comment went viral on Friday on Chinese social media platform Weibo, where several users slammed the company and vowed to never purchase its products.
"With this kind of attitude from Uniqlo, and their founder being so arrogant, they're probably betting that mainland consumers will forget about it in a few days and continue to buy. So, can we stand firm this time?" one user wrote.
Fast Retailing did not immediately respond to a Reuters request for comment.
China is Fast Retailing's biggest overseas market and it has more than 900 stores on the mainland. Greater China, including Taiwan and Hong Kong, accounts for more than 20% of the company's revenue.
The issue of sourcing from Xinjiang has been a geopolitical minefield for foreign firms with a large presence in China.
This was demonstrated by the consumer boycott Uniqlo’s rival, H&M, faced in China in 2021 for a statement posted on its website where it expressed concern about the allegations of forced labor in Xinjiang and said it would no longer source cotton from there.
H&M saw its stores removed from major e-commerce platforms and its store locations moved from map apps in China as it bore the brunt of consumer anger at companies refusing to source cotton from Xinjiang, although other Western brands including Nike, Puma, Burberry and more were also caught up in the controversy.