This Week: Is H&M’s Turnaround Working?

Last year, H&M set out on a globe-spanning campaign to rekindle its connection with shoppers, starting with a surprise Charli XCX concert in London at the height of Brat-mania. The marketing blitz was tied to the release of the fast fashion retailer’s fall collection, which mixed in more elevated long coats and feminine dresses alongside the usual cheap basics and trendy pieces.

It’s still waiting for returns on that investment. Net sales fell 1 percent in the company’s fourth quarter, which ended Nov. 30, and the company had earlier scrapped its profit margin target for 2024, in part due to the increased spending on marketing. Results due out on Thursday will reflect the holiday season, a make-or-break moment for H&M’s turnaround campaign.

The company is trying to occupy a narrow middle lane between Shein and Zara, offering appealing clothes that are higher quality than the former and cheaper than the latter. That puts it head to head not only with its direct fast fashion rivals, but brands such as Gap and Abercrombie that also offer a mix of affordable basics and trendier pieces.

It’s a risky gamble, but a necessary one. H&M needs an identity, and fast. You have only to look at the fate of Forever 21, which is in the middle of liquidation sales in the US, to see what happens to fast fashion retailers that promise little more than massive selection and low prices.

H&M is also in good company in attempting a bold rebrand. Nike, Gap and other giants are also trying to freshen their look and get customers excited again. Gap’s recently shown signs of turning the corner, but achieving an Abercrombie-style renaissance can be a long slog. Investors appear to be running out of patience with H&M. The company’s stock recently fell below where it traded in January 2024, when company veteran Daniel Ervér was named CEO.

Along with financial results, watch for the release of H&M’s annual sustainability report. The retailer is a big investor in planet-friendly fashion experiments, including textile recycling, lab-grown cotton, resale and more. It has also set a goal of more than halving emissions by 2030 compared to 2019 levels. In 2023, it said it had reduced them by more than 20 percent.

Now that H&M is approaching the halfway point, it needs to show it can grow sales and cut emissions and waste at the same time.

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