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H&M Profit Target in Spotlight as Cost-cutting Gathers Pace

H&M is under pressure to prove to investors it can turn its fortunes around. Reuters file photo
H&M is under pressure to prove to investors it can turn its fortunes around. Reuters file photo
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H&M Profit Target in Spotlight as Cost-cutting Gathers Pace

H&M is under pressure to prove to investors it can turn its fortunes around. Reuters file photo
H&M is under pressure to prove to investors it can turn its fortunes around. Reuters file photo

Swedish fashion retailer H&M is under pressure to prove to investors it can turn its fortunes around and fend off fierce competition from fast-fashion rivals such as Zara, whose sales are rising, and China-founded Shein, set to go public this year.
H&M, which sold more than $22 billion in clothing and accessories in its 2023 financial year, aims to reach an operating margin of 10% by the end of 2024.
Faced with falling sales, the retailer with around 4,300 global stores is intensifying cost-cutting, prioritizing profitability over revenues.
When it reports full-year results on Wednesday investors want to be able to see its pathway to that margin goal, against a backdrop of shaky consumer demand.
H&M's operating margin improved to 5.9% at the end of the third quarter, from 3.9% a year earlier, but the challenge this year will be to keep increasing margins at a time when many clothing retailers have signaled price cuts.
Known for dresses under $15 and $19.99 jeans, H&M could tweak its pricing strategy this year to reach its margin goal, said Andreas Lundberg, analyst at SEB in Stockholm. Its "price mix will be more important," he said.
"Although the last 10-15 years have been volume-driven for H&M, volumes are also very expensive to handle internally, in warehouses, in stores," Lundberg said. "In the future you may see fewer volumes."
Budget fashion retailer Primark also sees its adjusted operating profit margin recovering to more than 10% this year as sourcing costs fall, enabling it to absorb the higher shipping rates driven by disruptions in the Red Sea.
Bernstein analysts see H&M and Primark among the most impacted apparel retailers given their higher reliance on Asian sourcing and high use of sea freight.
Given that risk, another key figure investors will watch is H&M's stock-in-trade: the amount of inventory the retailer is carrying.
"H&M has managed to decrease this number significantly and the trend continues downwards, meaning they are shortening time from design to production to shipping," said Adil Shah, portfolio manager at Storebrand in Oslo, which holds H&M shares.
H&M's stock-in-trade as a percentage of rolling 12-month sales was 17.1% at the end of the third quarter, down from 21.6% a year earlier.
H&M, whose other brands include Arket, Cos, Monki, Weekday, and & Other Stories, has been closing stores and laying off staff. On Friday, it announced a plan to shut more than a fifth of its stores in Spain and lay off as many as 588 workers.
H&M had 701 fewer stores by end-August last year compared with the end of 2019, a decline of 13.8%.
Its cost-cutting has helped improve investor sentiment. H&M shares are up around 29% from a year ago, but with a price-to-earnings ratio of 18, still trade at a discount to Zara-owner Inditex, whose ratio is roughly 20.8.
Reluctant to fire the starting gun on price cuts, mass-market fashion retailers may "wait to see who will move first", said Alex Romanenko, head of retail at pricing consultancy Pearson Ham Group. Bank of America analysts see apparel prices in Europe falling by 2% in 2024, having risen by 4.5% last year.

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Fashion

Next Nudges Up Profit Guidance but Sees UK Headwinds

Shoppers walk past a NEXT retail store in London, Britain, January 2, 2025. REUTERS/Hollie Adams/File Photo
Shoppers walk past a NEXT retail store in London, Britain, January 2, 2025. REUTERS/Hollie Adams/File Photo
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Next Nudges Up Profit Guidance but Sees UK Headwinds

Shoppers walk past a NEXT retail store in London, Britain, January 2, 2025. REUTERS/Hollie Adams/File Photo
Shoppers walk past a NEXT retail store in London, Britain, January 2, 2025. REUTERS/Hollie Adams/File Photo

British clothing retailer Next edged up its annual forecast on Thursday, as it reported a 10.5% profit rise for its first half, but expects sales growth to slow in its second half and warned of headwinds in its core UK market.

The group, which trades from more than 800 stores in the UK and Ireland, including Reiss, Joules and FatFace outlets, and has an online ⁠operation serving the ⁠UK and overseas markets, said full price sales were 7.7% higher in the six months to August 1, helped by a hot summer in Britain.

But it said full price sales growth would slow to 5.8% in its second half, and moderated its second half sales growth expectations for the UK to 2.0% from 2.8%, flagging concerns in its ⁠home market which accounts for about three quarters of sales.

"Our primary concerns are rising inflation, higher mortgage interest costs and a weak employment market. These worries will only be compounded if they are accompanied by tax increases," it said in reference to new finance minister John Healey's first budget on October 28.

"It seems likely that it (the government) will have to increase taxes in order to fund its expenditure,” Reuters quoted it as saying.

British households will see their energy bills rise in October, inflation ticked up on Wednesday, and, last week, Next rival John Lewis highlighted a tough UK ⁠trading environment, saying ⁠consumers were holding back on bigger ticket items.

Rival Primark said trading in continental Europe remained challenging, though Zara owner Inditex reported a strong start to autumn trading.

Next made a profit before tax of £569 million ($762 million) in its first half. It said its international business had made an encouraging start to the season, and raised its second half sales growth guidance to 20.5%.

The retailer, whose shares have increased by a quarter over the last year, raised its profit before tax guidance for its year to January 2027 by £12 million ($16 million) to £1.255 billion, reflecting the small upgrade in sales expectations and some additional cost savings, mainly in warehousing. It made £1.158 billion in 2025/26.

Fashion

Ukrainian Fashion Designer Debuts Art between Air Raids

An empty street near the Ukrainian Foreign Ministry in Kyiv. (Asharq Al-Awsat)
An empty street near the Ukrainian Foreign Ministry in Kyiv. (Asharq Al-Awsat)
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Ukrainian Fashion Designer Debuts Art between Air Raids

An empty street near the Ukrainian Foreign Ministry in Kyiv. (Asharq Al-Awsat)
An empty street near the Ukrainian Foreign Ministry in Kyiv. (Asharq Al-Awsat)

In Kyiv's largest art museum, Arina Petrova and her father Serhii busily applied the final touches to their mannequins, anxious that a Russian drone attack could delay her long-awaited debut.

The fashion-designing duo from Ukraine's "Bob Basset" art house were about to present Petrova's first ever collection -- an array of punk leather animal costumes.

But with Russian jet-powered drones now crashing into Ukraine's capital on a daily basis, triggering air alerts that paralyze life in the city, the pair had more pressing concerns.

"If it's in the shelter, fine -- we'll do it in the shelter," Petrova told AFP, adding she was prepared to bring all the models and their cellist down to the basement to showcase their work.

Petrova and her 50-year-old father run their punk fashion studio out of Kharkiv, a heavily attacked city close to the Russian border.

Having arrived to the capital by minibus, their designs in hand, the pair wanted to show through their art that Kharkiv was still very much alive.

Petrova was concerned that a drone could cut things short.

"We want to have time to say what we want to say," the 28-year-old said with a sigh.

If halted, they would continue underground -- even if they had to use the flashlights on their cellphones to light up the show, she said.

As Petrova adjusted the lace on a corset, an alarm started blaring: Russian jet-powered drones were approaching the capital.

Security guards evacuated the audience.

Outside, a woman in a red dress posed for a photographer. There was a heavy explosion, she flinched, and without hesitation, resumed her pose with a smile.

In the distance, a plume of black smoke rose among the buildings.

- 'Become a little more ferocious' -

While other designs on display at Kyiv Fashion Week were full of color, Bob Basset's collection was monochrome.

In front of large black drapes, the designers adjusted a black leather breastplate adorned with a feather-like design, to be paired with a black horse mask.

For her first collection, entitled "Mutabor" ("I shall transform," in Latin), Petrova based her designs on creatures her father had imagined -- dark, feathered animals with claws.

"I feel like during war, everyone has to become a little more ferocious... grow fangs," the designer told AFP.

"You acquire something from the animal that makes you stronger."

Before Russia invaded in February 2022, Bob Basset had built a reputation designing leather masks, some of them worn by metal bands Korn and Slipknot.

But as Russian troops approached the outskirts of Kharkiv in 2022, the group closed their workshop and the family moved west.

Far from his hometown, Serhii sank into depression.

Leaving his wife and children safe in Europe, he returned to Kharkiv, under bombardment.

"I'm afraid," he said. "But I'm even more afraid of not being able to do anything tomorrow."

Their collection at Kyiv Fashion Week is their first in 11 years.

- Fashion amid the bombs -

Wearing a mask himself to hide a squint, Serhii has made face coverings the focus of his work -- a way to reinvent his identity.

He began creating masks for free for wounded soldiers who wanted to hide their scars.

His daughter joined him, and despite the sleepless nights, the workshop in Kharkiv came back to life.

"If I hadn't come back, this collection would never have existed," she said.

With just a few minutes to go before the show, Petrova appeared agitated.

In Kharkiv, anxiety kept her awake at night, as Russia bombed warehouses and logistics centers, complicating their work.

"If something hits the studio, everything we've worked on for a year will be gone," she said.

"Every day, there's this feeling that we have very little time. Something could happen, and you'll never be able to finish."

During a brief moment of respite from incoming strikes, a cellist played for a few moments.

Then, silently, the models made their way through the crowd, their faces masked, amid the flashes of cell phones.

The performance ended in a mix of applause and air raid sirens.

A woman approached Serhii to congratulate him, wearing a dress made from pieces of drones.

In the courtyard, Petrova smiled, despite the explosions from air defenses in the sky overhead.

She's used to it. In Kharkiv, "only those who are capable of creating under these conditions remain," she said.

Fashion

Joyful Dressing and the Trends that Took Over New York Fashion Week

Models present the latest creations from the Carolina Herrera SS27 show during New York Fashion Week in Manhattan, New York City, US, September 14, 2026. REUTERS/Caitlin Ochs

Models present the latest creations from the Carolina Herrera SS27 show during New York Fashion Week in Manhattan, New York City, US, September 14, 2026. REUTERS/Caitlin Ochs

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Joyful Dressing and the Trends that Took Over New York Fashion Week

Models present the latest creations from the Carolina Herrera SS27 show during New York Fashion Week in Manhattan, New York City, US, September 14, 2026. REUTERS/Caitlin Ochs

Models present the latest creations from the Carolina Herrera SS27 show during New York Fashion Week in Manhattan, New York City, US, September 14, 2026. REUTERS/Caitlin Ochs


Across the runways this New York Fashion Week, designers reimagined spring dressing by shaking up the season’s staples of florals and pastels, opting instead for more modern and irreverent trends.

From legacy brands to emerging talents, designers including Tory Burch, Ralph Lauren and Eckhaus Latta brought joy back to dressing with sartorial twists on color, movement and contrasts that could easily transition off the Spring/Summer 2027 catwalks and into New York’s busy streets.

While New York Fashion Week is only the first stop for celebrities and fashion editors before seeing what London, Milan and Paris have in store, the celebratory tone is bound to be contagious.

The joy of dressing Designers had a lot to celebrate, with many marking career milestones: Rachel Comey notched 25 years, Michael Kors and Carolina Herrera reveled in 45-year anniversaries for their brands, and Coach hit a storied 85 years.

Coach sent models down the runway in party hats, glittering gowns with colorful large bow trains, and gift-wrapped present accessories for its anniversary.

InStyle Fashion director Kevin Huynh said designers are waving goodbye to the quiet luxury era and leaning into vibrancy.

“We’re really stepping into like, more is more,” he told The Associated Press, “but not in that dopamine dressing where everything feels haphazardly put on, but like a real sense of vibrancy and excitement.”

Models present creations from the latest Michael Kors collection during New York Fashion Week in Manhattan, New York City, US, September 11, 2026. REUTERS/Caitlin Ochs

At Eckhaus Latta, designers Mike Eckhaus and Zoe Latta feted their J.Crew collaboration with confetti. Guests were told to open envelopes on their seats at the sound of laughter during the second half of their show and toss rainbow confetti onto the runway.

“Designers are really trying to kind of have fun and show the power that fashion can have in uplifting and inspiring people,” Matthew Velasco, ELLE’s fashion news editor, said.

Tory Burch embraced joyful dressing as a sense of escape, with models in color-blocked embellished looks strutting around a circular indoor catwalk that surrounded an outdoor garden with fountains. Burch said she wanted to contrast opulent femininity with utilitarian sportswear. Her collection featured embroidered cardigans with brightly colored skirts, boa-like thin scarves and a turquoise coat with a matching bag.

“I think when things are a bit more rough in the world you need to dream,” Burch said.

Ralph Lauren opened New York Fashion Week by bringing romance and a celebration of style to the runway.

“It’s about ways of dressing that celebrate ingenuity, originality, and character — the freedom and fun of creating a style that is truly personal,” he said in his show notes.

Michael Kors had the optimism to stage his show outside in the garden at the Museum of Modern Art, where a bright orange trench coat and sunny yellow shoes popped against his black and white looks.

Thom Browne, who often leans into whimsy, created a show inspired by “A Bug's Life,” with a giant indoor garden and models dripping in green crystals that hung from layered suiting.

Some channeled actual ladybugs and butterflies with giant colorful hoop skirts, and jackets that looked like cocoons, eliciting smiles from the crowd.

Collections filled with shades of blue Designers may not be feeling blue this season, but the color was certainly interwoven throughout their collections.

Ralph Lauren played with a palette of blues — from his classic denim to satin and lace gowns, to suiting and blue fur and feather collars. Tommy Hilfiger said he often takes his inspiration from nautical flags, so primary colors — including navy — were prevalent on classic and oversized blazers and rugby shirt stripes on his runway at The Plaza Hotel. Tory Burch styled turquoise and navy, and Henry Zankov delivered teal on the runway this season for Diane von Furstenberg.

After a decade-long gap, the Diane von Furstenberg line returned to New York Fashion Week with Zankov unveiling his first collection as artistic director for the brand. Known for his namesake knitwear brand, Zankov highlighted animal prints on von Furstenberg’s signature wrap designs, while incorporating sheer blouses and dresses along with fluid suiting.

“You want to feel alive,” Huynh said, “like we’re coming out of the cold of winter, and color is such an easy way to accomplish that.”

“Chartreuse had its moment, but teal is something that feels really refined,” he added.

Cobalt blue or Klein Blue — made famous by artist Yves Klein — also took over the runways with Proenza Schouler and Sergio Hudson including the color in their collections.

Accentuating the waist All eyes were on waistlines this season as designers sent models down runways in cummerbunds, scarves and chunky belts.

For Daniella Kallmeyer of Kallmeyer, the designer added a cummerbund to a buttoned-down blue top over trousers, as well as a white cummerbund embellished with white beading over an all-black suited look.

“It’s that injection of androgyny with a cummerbund in womenswear that feels exciting and edgy,” Huynh said.

At Ralph Lauren, the designer wrapped fringed scarves around the models to break up an all-white look or add a pop of color to the waistline.

Fringing out After shedding the constraints of winter coats and layers, designers introduced a freedom of movement and fluidity to their collections with fringe.

Asymmetrical dresses swayed with fringe at Jonathan Simkhai while shimmering fringe peeked out from an all-black look at Rachel Comey.

In a twist on tailoring, jackets dripping with fringe made their way down the runway at Monse.
“I always am a firm believer that with the Spring/Summer shows, designers really flex their prowess a little bit more than fall,” Huynh said. “You’re really getting the full spectrum of a woman and a man’s wardrobe.”