H&M CEO resignation: H&M faced a setback as its CEO, Helena Helmersson, unexpectedly resigned on Wednesday, leading to an 8 per cent drop in the company's shares. The departure comes at a challenging time for the Swedish fashion retailer, which has been grappling with declining sales and increased competition.

Leadership transition

Daniel Ervér, a long-time company veteran with 18 years at H&M, immediately assumed the role of CEO following Helmersson's departure. Helmersson cited the demanding nature of her four-year tenure as the reason for her decision to step down, stating she lacked the energy to continue.

Sales decline

The leadership change coincided with H&M reporting a 4 per cent drop in sales for December and January compared to the previous year, signaling challenges during the crucial Christmas shopping period. H&M, the world's second-largest listed fashion retailer after Inditex, has struggled to compete with rivals like Zara and Shein, both reporting robust sales growth.

Adil Shah, portfolio manager at Storebrand in Oslo, commented, “I think the market will welcome the change after digesting the numbers. Speculation that margin targets will not be met is one of the reasons being stated for the CEO change.”

H&M has shifted its focus to profitability rather than sales volumes, aiming to achieve a 10 per cent operating margin this year. However, the recent results indicate a fourth-quarter operating profit margin of 7.2 per cent, down from 7.8 per cent in the third quarter. The company acknowledged its 10 per cent margin goal as an “ambition.”

Bernstein analyst William Woods expressed skepticism about Ervér's ability to turn around the business, given his long tenure. JPMorgan analysts deemed the results disappointing, suggesting that the fourth-quarter profit weakness slightly reduces the credibility of H&M's 10 per cent margin target.

Karl-Johan Persson, H&M chairman, and grandson of the founder Erling Persson, expressed confidence in the company's position, stating they have "good conditions to make further improvements" in the coming year.

H&M shares were down 8 per cent at 154 Swedish kroner by 0840 GMT, following a 29 per cent rise in the last 12 months.

(With Reuters inputs.)