H&M closest peer Inditex reported their Q423 today (which is Nov-Jan, actually closer to H&M Q124 period, which is Dec-Feb) - H&M reports Q1 report ahead of Easter on 27.3. (EDIT: no separate sales report published anymore and Q1 report date moved to 27.3. from 28.3.)
Inditex has been performing better than H&M in terms of growth and profitability for years and continues on that path. Inditex grew close to 10 % in the quarter with an EBIT margin of 16 %, both well above H&M’s expected levels. Hence, we believe perhaps the most usual comparison is to look at the gross margin, where Inditex is also ahead of H&M, but there’s clearly a similar seasonal pattern. As you can see from the graph below, we expect H&M to perform relatively better than Inditex (ie. improve more from comparison period), but still be at a lower level.
On the outlook Inditex says that February-early March sales are off to good start with over 10 % growth. For gross margin, it sees a stable outlook for FY24. We are expecting a slight improvement in H&M gross margin for the similar period, but that’s still below Inditex’s level.
Overall Inditex’s report suggests that H&M should have room to improve their performance as there’s no clear headwinds in the industry, given Inditex’s good performance and outlook.
