H&M's profit miss and abandoned earnings margin target cause shares to drop by up to 8%.

• The group's fiscal third quarter operating profit was 3.51 billion Swedish crowns ($345.8 million), a decrease from 4.74 billion Swedish crowns in the previous year.
• The Swedish clothing retailer announced that it had abandoned its earnings margin target for 2024 due to the challenging conditions it faced earlier in the year.
• The cost of markdowns in relation to sales was predicted to "rise slightly" in the fourth quarter, according to H&M.

On Thursday, H&M's shares dropped by 8% after the company reported a miss on operating profit and abandoned its earnings margin target.

The Swedish clothing retailer reported an operating profit of 3.51 billion Swedish crowns ($345.8 million) for the group's fiscal third quarter, which was lower than the 4.74 billion Swedish crowns reported in the same quarter a year ago. Analysts surveyed by LSEG had forecast an operating profit of 4.93 billion, according to Reuters.

H&M abandoned its earnings margin target for 2024 due to the prediction of tougher circumstances in the first half of the year.

The move is expected to intensify the pressure on CEO Daniel Ervér, who has been in the position for only eight months. Following Helena Helmersson's departure in late January, Ervér promised to deliver "unbeatable value to our customers and sustainable growth."

Recently, H&M has faced challenges in increasing its profitability due to factors such as cooler weather, increased living expenses, and a decrease in post-pandemic spending, affecting both high street and luxury retail sales.

Inditex and Shein, the owners of Zara and a fast-fashion retailer respectively, are also stiffening competition for the retailer.

Our sales revenue and purchasing costs have been affected by external factors more than anticipated, resulting in an estimated operating margin of less than 10 percent this year, as stated by H&M's Ervér.

He stated that he was confident that their plan would lead to an increase in sales and profitability.

At 9:40 a.m. London time, H&M's shares fell by 4%, making it one of the worst-performing stocks on the pan-European Stoxx 600 during morning trading.

UBS analysts highlighted several significant areas of H&M's results in a research note, including strong sales in local currencies, rising markdown costs, and the retailer's plan to decrease its net store count.

The cost of markdowns in relation to sales was predicted to "rise slightly" in the fourth quarter, according to H&M.