Coronavirus Weighs on H&M’s Q4 Sales; Analysts Remain Cautious

H&M Group announced today that fourth quarter sales fell 10% in local currency (Swedish Krona) terms for the period September 1 to November 30, compared to the same period last year. Net sales for FY 2020 decreased 18% year-over-year. H&M shares were trading almost 3% lower in London at the time of writing.

H&M (UK:0HBP) began the year positively until the first wave of COVID-19 struck. Second quarter sales were hardest hit as temporary store closures and social restrictions reduced customer foot traffic.

The third quarter began with approximately 900 of the group’s more than 5,000 stores being temporarily closed and ended with just over 200 stores not yet having reopened. This brought some relief, and a strong recovery continued for much of the fourth quarter.

Sales between September 1 and October 22 were only down 3% in local currencies compared to a year earlier. However, the pandemic’s second wave derailed the recovery and another slowdown followed. Sales for the period October 22 to November 30 fell by kr9.2 billion, or 22% year-over-year. (See UK:0HBP stock analysis on TipRanks)

RBC Capital analyst Richard Chamberlain recently reiterated his Hold rating on the stock with a price target of kr200.00 (10% upside potential). He noted that while sales were showing good resilience, the latest wave of lockdowns could lead to further restrictions in stores, such as in Germany, H&M’s largest market.

Consensus among analysts is a Hold based on 4 Buys, 5 Holds and 2 Sells. The average price target of kr180.80 implies a potential downside of around 1% over the next 12 months.

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