HMB SS

H & M Hennes & Mauritz AB

Consumer


Presented:10/03/2019
Price:SEK191.66
Cap:$38.30B
Current Price:SEK174.80
Cap:$33.99B

Presented

Date10/03/2019
PriceSEK191.66
Market Cap$38.30B
Ent Value$29.81B
P/E Ratio24.84x
Book ValueSEK29.69
Div Yield5.11%
Shares O/S1,655.07M
Ave Daily Vol3,081,219
Short IntN/A

Current

PriceSEK174.80
Market Cap$33.99B
Hennes & Mauritz AB engages in the sale of clothing, accessories, footwear, cosmetics, and home textiles. The company products include accessories, underwear, cosmetics, sportswear, and other apparels for men, women, and kids. Its brands include H&M, COS, Monki, Weekday, & Other Stories, Cheap Monday, H&M Home, and ARKET. The company was founded by Erling Persson in 1947 and is headquartered in Stockholm, Sweden.

Publicly traded companies mentioned herein: Amazon.com Inc (AMZN), Hennes & Mauritz AB (HMB SS)

Highlights

The presenter is currently short shares of H&M (HMB SS) due to structural challenges within the apparel retail industry, and specifically the disruption caused by online stores. Over the last ten years, H&M has struggled to deal with this online shift and their business has suffered as a result. As they’ve tried to move toward an online model, operating margins have declined from 23% ten years ago to ~8% today. This year H&M has had a string of stable quarters which have inspired confidence among investors that they can rebuild their operating margins back to the company’s target of 10% - 11%. The presenter thinks that this is a smokescreen to cover for last year’s poor execution. He believes that these structural challenges will continue to have a negative impact on margins and that management isn’t making the correct decisions to move toward an online model. The stock currently trades at 23x earnings, which is a premium to the best in class global apparel retailers. When hope fades that the company can rebuild their margin profile, the stock should normalize and trade inline with the rest of these retailers. This would imply a low double digits earnings multiple and 40% downside to his price target of SEK120. 

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