H&M

H&M’s Q4 earnings surprised on the upside again, which makes us more confident that a gradual margin recovery is taking shape. While the operational cost control was strong this quarter, sales growth remained modest, something we view as critical to reach its long-term margin ambitions. In our view, the valuation levels are still elevated, and, given the ongoing topline concerns, we still view the risk/reward as unattractive. As a result, we reiterate our Sell recommendation but increase our target price to SEK 155 per share (prev. 140 per share), mainly due to increased earnings estimates.

We believe consumer demand has remained subdued in H&M’s Q4 (Sep-Nov), although supply chain efficiencies and external margin tailwinds should support profitability. We have lowered our earnings estimates for 2025 and beyond, but margins remain broadly intact, reflecting our confidence that H&M will continue to demonstrate strong cost control. We continue to see the share as expensive at current valuations and maintain a Sell recommendation.