Citi has removed its three-year-old sell recommendation on clothing giant H&M, upgrading the stock to 'hold' thanks to improved cost control. At the same time, the target price has been significantly raised to 172 kronor (from 107), according to a report by Dagens industri.
Citi's previous sell recommendation was based on H&M experiencing underlying inflation of 2 percent in selling, general, and administrative expenses, which risked squeezing margins unless sales increased significantly. However, this year the situation on the cost side has improved, the bank notes.
“Although H&M's sales growth in constant currency has remained at low single-digit levels, we estimate that underlying inflation during the first three quarters of the 2025 fiscal year has been close to zero, which leads us to upgrade the stock to neutral,” Citi writes.
For the fiscal years 2026 and 2027, the aforementioned costs are expected to increase by 0.5 percent, while sales are projected to rise by 3 and 4 percent, respectively, in constant currency.
