David Herro Comments on H&M

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Oct 09, 2018

H&M (OSTO:HM B), a Swedish-based global fashion retailer, was the largest contributor for the quarter. While third-quarter profits were somewhat lower than expected, we believe the most recent financial results contain signs of underlying improvement. The four markets impacted by a previously disclosed logistics issue reported an 8% drop in local currency sales. However, the remaining 66 markets, which account for approximately 76% of group sales, experienced sales growth of 8% in local currency. This highlights a material improvement in performance of the undisturbed markets. Management has noted that the logistics issues have largely been resolved and the company expects a lower financial impact in the fourth quarter. Additionally, the company’s online sales were up 32% and new business sales were up 15% during the quarter. Management is also significantly improving the company’s collections and better positioning the business for an omnichannel retail world. While the company still has some challenges to overcome, the most recent results have increased our confidence in our investment in H&M and its future performance.

From David Herro (Trades, Portfolio)'s third quarter 2018 Oakmark International Fund commentary.