H&M: UBS downgrades stock

(CercleFinance.com) - On Friday UBS downgraded H&M shares from 'buy' to 'neutral', with a target price reduced from 187 SEK to 149 SEK (cp: 144 SEK, +0.
3%).

The analyst says that its positive opinion on the stock was previously based on the prospect of a turnaround in business, accompanied by a recovery in its operating margin.

He believes that the recent favourable trend in supply, prices and procurement costs, as well as the disposal of small secondary brands (Afound/Monki), were all steps in the right direction.

But the prolonged weakness in sales and the volatility of operating margins suggest that the recovery will take much longer than we had previously anticipated, the broker adds.

UBS explains that this situation could lead the clothing manufacturer to resort to promotional offers likely to penalise profit margins, not to mention the hardening of other exogenous factors.


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