On Tuesday, RBC (TSX:RY) Capital adjusted its stance on Hennes & Mauritz AB (ST:HMb) (HMB:SS) (OTC: HNNMY), commonly known as H&M, downgrading the stock from Outperform to Sector Perform and revising its price target to SEK165.00, down from SEK185.00. The revision reflects a more cautious outlook on the company's sales recovery timeline.
The downgrade comes as H&M focuses on revamping its brand, with significant efforts concentrated in eight key cities worldwide. This strategy includes refurbishing premier stores and intensifying marketing initiatives within these regions. According to RBC Capital, these changes have positively influenced the revamped stores, though the overall impact remains localized.
H&M's digital presence has seen improvements with over half of its global sales markets now accessing a new website. The company is also enhancing its mobile app and user interface, adding features such as editorial content that connects consumers with fashion trends and influencer endorsements. These developments are part of H&M's strategy to increase consumer engagement and drive traffic growth rather than conversion rates.
Despite these initiatives, RBC Capital anticipates that the competitive landscape and extensive nature of H&M's transformation will result in a prolonged recovery period for the retailer's sales. Consequently, the firm has tempered its sales expectations for H&M, leading to the lowered price target and stock rating downgrade.
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