Hennes & Mauritz, or H&M as it is popularly known, is facing a market crunch in share prices, much as others in the retail sector, due to the coronavirus pandemic. People have been home-bound now for the best part of a month, and retail shops have been hard hit with no footfalls and people generally avoiding splurging on non-essentials.
H&M, the second-largest fashion label of the world, has seen a 30 percent crash in its stock prices just when the company had successfully managed a turnaround from being outperformed by competitors in the sector.
So this is the right time to invest in the company with the share prices down to 137.2 ($13.61) Swedish Kronor and the company set on the right path of growth with all parameters in place for recovery.
Market analysts believe that once things normalize post-pandemic, H&M will be one of the few retailers who will survive the recession. Most of the brokerage firms and analysts have maintained an outperform rating for the trending stock and a strong buy.
Richard Chamberlain, an analyst a RBC Capital Markets, has an outperform rating for H&M shares and estimates the shares to rise 9 to SEK150. The shares were selling at SEK210 in February. H&M shares fetched SEK363 at its peak.
According to him, “The second quarter looks awful, but any industry shakeout should favor H&M, which we think will emerge as one of the winners from the downturn.”
Another market player, broker Jefferies predicts a 38% rise to SEK190, and Banco Santander has a price target of SEK163, reports Barrons.
H&M has managed to get an extended credit facility of 980 million euros for a year “to further strengthen its liquidity buffer and financial flexibility in response to the Covid-19 situation.”
With the lockdown in China ending, almost all its stores have reopened and the company has regained some of its lost ground in the country.
RBC’s Chamberlain said the company “was on a strong recovery path prior to the downturn.”
In keeping with most companies, H&M has also predicted a slower than expected second-quarter performance, but market watchers are confident that the currently trending stocks of the retailer will outperform with its turnaround policy in place from before the pandemic, its flexible cost structure, revamped online presence and global brand reach of almost 5000 stores.
Stockholm-based H&M has made a name for itself in value for money fashion segment. It is a family-run concern and has seen improved performance under Karl-Johan Persson, the grandson of the founder. The company saw profits decline after its competitors moved to online presence and H&M was a little slow on the uptake. But it soon realized that brick and mortar stores needed a strong online backup and a good supply chain to make up for the new way of shopping. The company now is selling more items online and creating new brands and different store concepts to appeal to a wider variety of customers.
The company has kept 47 of its 51 online stores open, and in March digital sales grew 17% year-on-year.
H&M’s first-quarter figures were strong. Sales went up 8 percent to SEK54.9 billion and it turned in a profit of SEK2.5 billion.
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