H&M chief quits as fashion chain struggles to lift profits

H&M’s chief executive Helena Helmersson has quit after little more than four years in the top job as the Swedish fast-fashion group struggles to lift profitability.

Helmersson will be replaced by Daniel Ervér, the 42-year-old head of H&M’s main brand and an 18-year company veteran, the Swedish group said on Wednesday.

The purveyor of cheap chic has suffered from falling profit margins for more than a decade and surrendered its status as the world’s largest fashion retailer by sales to Inditex, the Spanish owner of Zara.

H&M had on the one hand been squeezed by lower-cost retailers such as Shein, the Chinese fast-fashion group, and on the other from higher-priced clothing from Zara, analysts have said.

Shares in H&M fell 10 per cent in morning trading on Wednesday as investors took fright at lower than expected profits in the fourth quarter and the promotion of an insider to the top job.

The retailer, which has said it is prioritising profitability over sales, reported an operating profit margin of 7.2 per cent in the fourth quarter, down from 7.8 per cent in the previous three months. It is aiming for an operating margin of 10 per cent this year, up from 6.2 per cent in 2023 and 3.2 per cent a year earlier.

H&M’s operating margin was more than 20 per cent in 2010 but has fallen since then, and was last above 10 per cent in 2017. Inditex’s operating margin has only dipped once below 10 per cent, in the first year of the Covid-19 pandemic in 2020. The group’s operating margin was 17 per cent.

Ervér, who joined H&M as a summer trainee in 2005, told the Financial Times that he believed in the core business model of H&M even as competition from the likes of Shein and Temu has intensified.

“I am confident that we have a very good direction for where we’re heading. Cash flow and profitability are improving, which allows us to invest further and excite customers. We need to truly accelerate that,” he added.

Helmersson, who had worked at H&M for 26 years, said in a separate interview that she decided to step down as her energy was “not 100 per cent” after dealing with the Covid-19 pandemic and fallout from Russia’s full-scale invasion of Ukraine in her term.

“A lot of unexpected things have happened. I feel it’s the right step to take. There has been a lot of hard work to get the company to a better place when it comes to profitability, cash flow and sustainability. Now we need to work more on sales activities and profitable growth,” she added.

Some H&M investors and analysts have privately suggested that an outsider is needed to shake up the Swedish group. But the founding Persson family, which holds the chair role as well as almost three-quarters of the votes, has consistently favoured internal candidates.

“The H&M group is in a strong position, with a positive profitability trend and good conditions to make further improvements in 2024 . . . Daniel is a competent, experienced and respected leader and has the qualities needed to continue to develop the H&M group,” said Karl-Johan Persson, H&M’s chair and a former chief executive.