In an unforeseen development on Wednesday, H&M’s CEO abruptly resigned, prompting the immediate appointment of company veteran Daniel Erver as the new leader. This transition is challenging for the Swedish fashion retailer as it grapples with increasing sales and profitability. Following the announcement, shares in H&M Hennes & Mauritz AB experienced an 8% decline. Outgoing CEO Helena Helmersson cited her decision to leave the company after a four-year tenure in the top position, describing the role as “very demanding.” In discussions with journalists, she expressed a lack of energy to continue in her current capacity.
The world’s second-biggest listed fashion retailer has struggled to compete with Zara owner Inditex and low-priced fast-fashion giant Shein, which have gained market share over the past year. It has focused on profitability rather than sales volumes as it tries to reach an operating margin target of 10%.
In the last two years, H&M has closed more than a thousand stores across Europe and Asia and has moved to sell online only. Higher raw materials costs and a weaker euro against the dollar have also hurt its profit.
On Wednesday, H&M said sales for December and January — the critical Holiday shopping period — had fallen by 4% compared to the previous year. It also warned that cost pressures would remain high, including rising freight and logistics costs and the ongoing pandemic.
The company has already cut several jobs, focusing on “recalibrating our resources” for 2024. It will also invest more in its core H&M brand, which has lost market share to Shein and Zara, while investing in smaller brands such as COS, Monki, Weekday, & Other Stories, and Arket.
It will also expand its H&M home shopping service, gaining traction in the United States, and open more stores in China. It will also close some existing locations, mainly in Europe and the Middle East. In the past five years, it has closed about 300 stores and opened more than 100.
Erver, 42, joined the company in 2005 as a summer trainee and has worked in many departments, including merchandising and purchasing management. He has been in the H&M group’s management team for 18 years and was most recently responsible for its flagship H&M brand, which he will keep alongside his new CEO duties.
Hennes & Mauritz spokesman Karl-Johan Persson said he expected Erver to drive the company’s strategic plan forward. “We expect to see further profitability improvements and brand development for the company’s main brands,” he said.
Despite the challenges, the company has made progress towards its 10% operating margin target, which is still ambitious given the weak results. Its EBIT margin rose to 4.74 billion crowns ($438.6 million), above the 4.07 billion forecast in a Refinitiv poll of analysts. The company credited progress in cutting inventory to 100 days and focusing on efficiency. It added that its digital business, including a popular second-hand clothing service called Sellpy, is growing well in 24 European markets.
