H&M surprised everyone with a sudden change in leadership, appointing Daniel Ervér as the new CEO, replacing Helena Helmersson. This decision comes as the Swedish fashion retailer faces performance challenges, falling behind competitors like Inditex and Shein.
The announcement resulted in a 12% drop in H&M shares, following the company’s report of a 4% decline in sales for December and January compared to the previous year, indicating a tough period during the crucial Christmas shopping season.
Helmersson, who resigned after four years as CEO, mentioned the demanding nature of the role and a lack of energy to continue.
Daniel Ervér, a 42-year-old H&M veteran with 18 years of experience, previously served as the head of the core H&M brand. In an interview with Reuters, Ervér shared his interest in the role in December, with the board finalizing the decision on Wednesday.
H&M, the world’s second-largest listed fashion retailer, has struggled to keep up with rivals like Zara and online fast-fashion giant Shein, both of which have seen stronger sales growth.
Despite the challenges, Ervér remains focused on profitability, aiming for a 10% operating margin this year. H&M plans to achieve this goal by closing stores, laying off staff, and maintaining a rigorous cost-cutting approach.
H&M’s fourth-quarter operating profit margin dropped to 7.2%, down from 7.8% in the third quarter. Sales for the period from Dec. 1 to Jan. 29 fell by 4% in local currencies, in contrast to a 5% increase in the same period last year.
While H&M’s fourth-quarter operating profit of 4.33 billion crowns ($415.4 million) improved from the previous year, it fell short of the 4.57 billion expected by analysts.
Analysts from JPMorgan expressed disappointment with the results, suggesting that the weakness in fourth-quarter profit slightly diminishes the credibility of H&M’s 10% margin target.
Karl-Johan Persson, H&M chairman and grandson of the founder, stated that the company is in a strong position with good conditions to make further improvements this year. The Persson family holds a 51% stake in H&M.
Despite recent challenges, H&M’s shares had gained about 29% over the last 12 months, but the recent leadership change led to a 12% decline by 1445 GMT.
