H&M chief executive Helena Helmersson announced on Wednesday (Jan 31) that she was stepping down, sending shares in the fashion retailer tumbling as the Swedish company reported lower-than-expected profits in the fourth quarter.

Helmersson, who has spent four years at the helm, said the job had been “very demanding at times for me personally”. She will be replaced by Daniel Erver, who has worked for the group for 18 years in various roles and most recently as head of the H&M brand.

The group’s shares plunged by 9 per cent on the Nasdaq Stockholm after the announcement.

The leadership change came as H&M said sales for December and January fell by 4 per cent compared to the previous year, a bad sign for the key Christmas shopping period.

The Swedish group, the world’s second-biggest fashion retailer after Zara owner Inditex, posted a net profit of 8.75 billion kronor (S$1.13 billion) in 2023. This marked a significant increase from a year earlier, which the group attributed to higher sales and improved margins.

Net sales rose by 6 per cent for the full year to 236 billion kronor. Operating profit for the year more than doubled to 14.5 billion kronor, corresponding to an operating margin that almost doubled during the period, from 3.2 to 6.2 per cent.

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“Our improvement work in the supply chain and continued normalisation of the external factors that influence purchasing costs resulted in a stronger gross margin,” H&M said.

“For many consumers, the year was marked by lower purchasing power because of high inflation and high interest rates. Despite this, our net sales in comparable markets increased in relation to 2022.”

But in the fourth quarter, the fashion giant reported a 4 per cent drop in net sales in local currencies. Net profit in the fourth quarter reached 1.58 billion kronor, up from a net loss of 864 million kronor a year earlier.

Still, this fell far short of analyst expectations of a quarterly net profit of 3.12 billion kronor, according to a Bloomberg survey. The group has struggled to compete with Inditex and low-priced fast fashion giant Shein, both of which have seen strong sales growth.

“We think there’s a lot that needs to be done or could be done to turn around this business,” said Bernstein analyst William Woods. Commenting on the leadership change, he said that “the question is whether or not a person who’s been there for 18 years is the right person, or even has the mandate to take those steps”.

In 2022, the company’s withdrawal from Russia after Moscow’s invasion of Ukraine and a cost-cutting programme cost it almost 2.6 billion kronor.

The group, which in addition to H&M includes brands such as COS, Arket, & Other Stories and Monki, said it saw “good conditions for continued profitable and sustainable growth in 2024”.

It said it aims to “increase sales by 10 to 15 per cent per year with continued high profitability.” AFP, REUTERS