Shares of H&M (HM.B) rose 4% to 129.96 kroner on the day after Bank of America double-upgraded the retailer to buy from underperform and lifted its price target to 165 kroner from 90 kroner. This was a result of the bank’s belief that earnings are not only bottoming, but are about to rebound faster and stronger than expected by the market.
The analysts cited expectations that input costs and currency headwinds will reverse, a SEK2 billion cost-savings plan, and one-offs on Russia and restructuring being behind it. The market does not believe in the recovery plan, and the number of sellers on the sell-side is at a three-year high, while the short-interest is greater than 10% of free float.
H&M is a Swedish multinational clothing-retail company known for its fast-fashion clothing for men, women, teenagers, and children. Founded in 1947, the company has since grown to become one of the largest fashion retailers in the world. With more than 4,500 stores in 62 countries, H&M is the second-largest global clothing retailer, behind only Inditex (owner of Zara).
The company has been struggling in recent years, with sales declining for the first time in its history in 2015, and further declines in 2016. This was due to a combination of factors, including a stronger dollar, increased competition, and the rise of online shopping. H&M has responded to these challenges by expanding into new markets, launching new brands, and focusing on digital initiatives.
The company has also announced a SEK2 billion cost-savings plan, which is expected to help improve profitability. This plan includes streamlining operations, reducing inventory, and cutting costs in areas such as marketing, logistics, and administration. Additionally, the company has been focusing on improving its online presence, launching a new online store in the U.S. and expanding its presence in China.
H&M is also looking to increase its presence in the U.S. market, with plans to open 50 new stores and expand its e-commerce capabilities. The company has also been expanding its product range, introducing a new line of sustainable fashion and launching a new beauty line.
Overall, Bank of America believes that H&M is well-positioned to benefit from the current market conditions and is optimistic about the company’s prospects. The analysts believe that the company’s cost-savings plan and digital initiatives will help improve profitability and that the company is well-positioned to benefit from the current market conditions. With increased competition and the rise of online shopping, H&M is looking to capitalize on its strengths and position itself for future growth.
