Analysts had mixed views of H&M Group’s latest results this week, some emphasising how the company still had plenty of work to do. But investors in the firm didn’t seem to be listening to those at the gloomier end of the spectrum and sent its share price up over 15% on Thursday. It jumped again when stock markets opened on Friday but then started to ease back.

What it means in practice is that the company’s market capitalisation is almost a quarter higher now than it was a month ago.

But why weren’t analysts in an equally ebullient mood and what exactly did they think? Well, to start with, they weren’t pessimistic so much as cautious.

In a note, Jefferies repeated its stance that anyone owning the shares should hold them rather than buy more. But they don’t see the stock as a sell.

The analysts seemed to like the group’s the overall message of “a clearer focus on hiking fashion content to lift asset productivity”, but noted that the “shift in trading strategy does come with risks”.

They pointed out that the firm’s 2% sales drop was nonetheless boosted by an extra day in Q1 due to it being a leap year. But they also highlighted the improvement as the quarter progressed and at the start of Q2 in March.

Jefferies also spoke of a “more front-footed trading approach to SS24” and the “step-up in fashion content (backed by increased design capability)” seeming “like a sensible approach, backed by near-shoring”.

Meanwhile, Alice Price, Associate Apparel Analyst at GlobalData, seemed more downbeat. She highlighted the “shaky start to FY2023/4… pointing to yet another challenging year ahead for the group”.

She said its portfolio brands “painted a better picture” than H&M itself with sales increasing 8%, “signalling that the group’s eponymous fascia remains the crux of the problem, as its lacklustre offering continues to inhibit top-line growth”.

Price thinks that H&M’s aim of reacting more quickly to trends could be a problem if not executed well. 

“Soon after his appointment in January, H&M’s new CEO Daniel Ervér set out his strategy, involving reacting quicker to trends to compete with Shein, but also selling higher priced items like its main competitor Zara,” she said. “However, Ervér must ensure his strategy does not get too confused, as this could risk H&M becoming a jack of all trades and a master of none”.

But she also highlighted some green shoots with operating profit rising and Eastern Europe representing H&M’s most resilient region in terms of revenue growth, rising 8% in local currencies. 

This was fuelled by it reopening stores in Ukraine from November 2023, after it had halted operations in the region in February 2022 amid the onset of the Russia-Ukraine war. 

She added that “Southern Europe was the only other region to record growth, rising 1%, while the Nordics declined by 2% and growth in Asia, Oceania and Africa was flat. Western Europe and North and South America continue to underperform, with sales declining 4% and 7% respectively, as both regions continue to grapple with high inflation, leading consumers to be more discerning regarding their apparel spend”.

And Robyn Duffy, senior analyst at consulting firm RSM UK, was the most pessimistic of all.

“H&M is off the pace in the fast-fashion race with [the] decrease in sales underlining a turbulent period for the retailer,” she said. “In the current economic climate, the business has struggled to stay competitive against burgeoning counterparts including Inditex and fast-fashion giant Shein.

“It’s a common theme we’re seeing across retailers. Brands that left store rationalisation and investment in logistics late have struggled to keep control of margins. Those who were quicker off the mark to invest early in the downturn are now entering the easing economic landscape in stronger shape. As we come to the end of the inflationary period and cost of living pressures begin to ease, brands like H&M are struggling to compete and find themselves chasing their tail strategically.” 

But she thinks Ervér might have the right idea: “With Daniel Ervér focused on profitability and improving margin, we’ve seen gains in these areas which should go some way to reassuring investors. With aims of reaching a 10% operating margin by the end of the year, this should allow the business to invest in better quality product at a better price, and give H&M a more competitive edge against its rivals. H&M will be one to watch for the rest of the year in terms of whether this new strategy will pay off.”