H&M stock rallied 20% on Thursday: explained here

H&M Hennes & Mauritz AB (ETR: HMSB) was seen trading about 20% up on Thursday after reporting strong results for its first financial quarter.

H&M stock up on future outlook

The retail stock is being rewarded because its top boss sounded positive on the future as well. In the earnings press release, CEO Helena Helmersson said:  

H&M continues to stand strong with robust financial position, stable cash flow and well-balanced inventory. Start of the year shows that we’ve taken further steps towards the goal of achieving an operating margin of 10% already next year.

H&M attributed much of the strength in the recently concluded quarter to Sellpy – its online marketplace for used items. For March 2023, the fashion retailer expects a 4.0% increase in sales in local currencies.

H&M Q1 financial results

H&M reported SEK 541 million ($52 million) of net profit for its fiscal Q1 – up from SEK 217 million last year and better than SEK 975 million loss expected. Sales climbed 12% in the quarter to SEK 54.87 billion.

On the flip side, higher raw materials and freight costs and currency headwinds resulted in a 210 basis points hit to gross margin that printed at 47.2% as per the earnings press release.

The situation is gradually becoming less negative and is expected to become positive for goods that will be sold later in the year.

Year-to-date, H&M stock is now up about 25%.

Does H&M stock have any upside left?

Last month, Bank of America analysts double-upgraded H&M stock to “buy” and raised their price objective to 165 Kroner – another 15% upside on top of today’s price action.

After falling 80% in 10 years, we believe earnings are not only bottoming, but are about to rebound faster and stronger than expected by the market.

Also on Thursday, the Swedish company said it will propose that Christina Synnergren be appointed to its board at its annual meeting in May. Synnergren was most recently a senior partner and managing director at Boston Consulting Group.