Hennes & Mauritz (Sell, TP: SEK115.00) - Sales beat and earnings risk
The Q3 sales beat was offset by rising costs from the transition to a new logistics system (considerable effect, according to H&M). LFL sales remain negative and it appears a bit early to talk about a turning point, we believe. We have left our 2018e EPS unchanged but raised our 2019e by 3%. At a ~17x 2019e P/E, after the relief rally, H&M needs further key sales to improve to defend the current share price. We keep our SELL but with a new SEK115 (110) target price.H & M Hennes & Mauritz is engaged in the sale of clothing and cosmetics in Sweden and internationally. Co.'s stores offer basics, tailored classics, sportswear, and maternity clothes for women; basics, leisurewear, and seasonal fashions for men; denim and street fashions; and fashion wear for children and teenagers, as well as accessories, underwear, and shoes. Co. also provides makeup and body care products; and home fashion products, which include interior textiles for the bedroom, bathroom, living room, and kitchen. Co. has approximately 3,132 stores, including 110 franchise stores, 85 COS stores, 79 Monki stores, 21 Weekday stores, 8 & Other Stories stores and 3 Cheap Monday stores.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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