H&M's fourth-quarter sales dented by late Black Friday

By Helen Reid and Agata Rybska

STOCKHOLM (Reuters) -H&M reported weaker-than-expected fourth-quarter sales on Thursday due in part to a late Black Friday, but said sales were up 4% in December and January, indicating a better start to the new fiscal year for the Swedish fast-fashion retailer.

CEO Daniel Erver, who took over a year ago, said investments in marketing were starting to pay off as its operating profit margin for the fourth quarter to Nov. 30 widened to 7.4% from 6.9% a year earlier.

"I'm pleased with the early progress, but I believe that there is more potential for us," Erver said in a press conference.

H&M has been struggling to expand its sales as Chinese online retailer Shein attracts cash-strapped shoppers with ultra-low prices and Zara owner Inditex has managed to keep selling more clothes at higher prices.

In a push to make H&M trendier, Erver has increased marketing spending and hired pop star Charli XCX to model H&M's autumn collection and to perform at free gigs attended by thousands during London Fashion Week and in New York's Times Square.

Its shares were down 5.13% at 1133 GMT as analysts said H&M still had work to do to turn its performance around.

"Considering the investments done in the offering (sharper product, refurbished stores in key cities, investments in price, and 600 million Swedish crowns more in marketing spend) we had expected more than 3% growth in Q4 and 4% growth in Q1 (Dec-Jan)," said Danske Bank analyst Daniel Schmidt.

H&M's first-quarter marketing spending is expected to increase year on year, but be somewhat lower compared to the fourth quarter.

"The question mark at this stage is whether these marketing efforts will pay off and drive sales growth acceleration in the coming quarters," said Cedric Rossi, consumer analyst at Bryan Garnier.

H&M's fourth-quarter sales of 62.19 billion Swedish crowns ($5.65 billion) were up 3% in local currencies but below the 63.48 billion expected by analysts polled by LSEG.

Black Friday was on Nov. 29 last year, which meant some revenue was booked in the following quarter, hitting fourth-quarter sales by just under 1%.

H&M also took a 200 million crown hit to operating profit due to winding down costs as it folds its Monki brand into Weekday to streamline operations. The move, announced in November, will lead to the closure of most Monki stores.

The group has accelerated its store closures in recent years and focused new store openings on growth markets. It reduced its net store count by 116 last year.

H&M proposed a dividend of 6.80 crowns per share for 2024, up 4.6% from 6.50 crowns paid for 2023.

($1 = 11.0038 Swedish crowns)

(Reporting by Helen Reid in Stockholm and Agata Rybska in Gdansk; Editing by Jan Harvey, Kate Mayberry, Kirsten Donovan and Jason Neely)