H&M Kept at Sell as Berenberg Notes Potential Gross Margin Pressure Ahead

11:59 AM EDT, 09/28/2026 (MT Newswires) -- Berenberg maintained its sell rating on H&M (HM-B.ST) as analysts noted potential gross margin pressure ahead after the clothing retailer's recent fiscal third-quarter update. "We continue to see downside risk versus consensus estimates on the gross margin in FY 2027E. The consensus (Visible Alpha) gross margin estimate for FY 2027E stands at 53.9%, slightly below the company's target corridor of 54%-55%. Our estimate is now 53.2%, reduced from 53.6% previously," the research firm said in its Monday note. Berenberg added that its EBIT estimate for fiscal 2027 remains 7% below Visible Alpha consensus, despite raising its profit estimates on evidence of "strong" operating expense control. For H&M's fiscal third-quarter update, analysts said that EBIT came in 17% above consensus. However, excluding a one-off benefit from the reversal of US tariffs, underlying EBIT was 1% below consensus. Berenberg added that September trading was "reassuring," with constant-currency growth of 1% despite challenges in Europe and hotter weather. "On a P/E and FCF yield basis, as well as versus our DCF valuation, H&M continues to look expensive in our view. No doubt there are market factors supporting the valuation, but we see no reason on potential news flow grounds to become more constructive on the stock at this stage," the note said. The stock's price target of 135 kronor was maintained.