Niklas Magnusson, Hanna Hoikkala, and Anna Molin
Hennes & Mauritz (H&M) chairman Stefan Persson may be single-handedly propping up shares in the Swedish fashion retailer.
In April alone, the billionaire acquired about 18.2 million shares in Stockholm-based H&M for 2.46 billion kronor (€231m), bringing the value of purchases since the beginning of last year to 13.4 billion kronor (€1.26bn).
The transactions mean Persson and his family now hold 42.8% of H&M, according to Bloomberg calculations based on the latest regulatory filings. As the buying has intensified, H&M’s share price has recovered. Since the end of March, H&M is up more than 20%, after slumping more than 40% in the preceding 12 months.
“We have had a lot of incoming calls from investors wanting to understand why H&M shares have risen so sharply over the last few weeks and whether this has any implications for our fundamental views on the stock,” Morgan Stanley analysts Geoff Ruddell and Amy Curry said in a note to clients late last month. “It does not,” he said.
Recent gains in H&M’s share price are primarily driven by the chairman’s purchases, and the analysts remain “as bearish as ever” on the stock, they said. H&M traded as much as 2.3% lower in the latest session in Stockholm. It is valued at €23.48bn. But the chairman’s purchases have provided some respite to investors as H&M struggles to adapt its business model to a world in which physical shops are less important and a big online presence is key.
Of the 34 analysts who provide their research on H&M, only two are advising clients to buy the shares. Eighteen have sell recommendations and 14 have hold ratings.
On average, the analysts predict H&M shares will fall about 20% over the next 12 months, marking the worst return potential the company has had since at least early 2004. The Morgan Stanley analysts said they expect the effect Mr Persson is having on the shares to peter out in the next few days because they expect him to limit new purchases to the amount he gets paid out in dividends this month. There’s also only a “limited risk that the Persson family could look to take H&M private,” they said. The family has also repeatedly denied it has any such plans.
H&M’s downbeat forecast for the start of 2018 was exacerbated by unseasonably warm European weather in January followed by February’s cold snap, whipsawing the clothing retail industry.
Earlier this year, H&M said it’s maintaining its targets for sales growth of at least 25% from e-commerce and new businesses this year, even though it missed that rate in the first quarter.