Case: Hennes & Mauritz

StocklesAnalyse Comments


Hennes & Mauritz (HM B) is one of the most known retailers in the world. The combination of quality and cheap has been a success for a long time for the Swedish worldwide retailer. However, like most retailers, HM B is struggling. In US that´s mostly due to increased competition from Amazon, but is that also the case for HM B? I doubt it. Let me just quickly explain why.

Case 1: Amazon

Now, with the current Norwegian laws, Amazon is something I don´t use intend to use. The explanation is shipping fees. One thing is to send a product from A to B. That fee is quite high right now, but manageable, and possible to account for. However, the problem is that we also (often) must pay a secondary shipping fee to our customs for checking the product. We are not talking about a few dollars, but maybe something around $10 – $40 and that could easily increase the total price by 50%. This cost is also variable, not fixed, so we can´t say for sure if we will pay it or not, so most people just don´t buy from Amazon.

Case 2: E-commerce

In the latest quarterly report the CEO (Karl-Johan Persson) said that HM B is on board for managing the new trend in E-commerce, and they are investing a lot of money in digitalization. While I actually prefer the site of competitors like Zara and Zalando, I normally trust that the CEO knows better than the customers how they are doing in their business. Another positive factor here is that Persson has been buying a lot of stocks lately. As we know, insiders can sell for many different reasons, but when they buy a huge amount of stocks, it normally represents something good for the shareholders.

My main reason for writing this analysis is because I want to see if the dividend is safe. Let´s first take a look at the fundamentals. By the way (All of the graphs are taking from borsdata I highly recommend this site if you are interested in Nordic companies.


P/E, P/B and P/S is almost historically low. E/S has been stable, and R/S has increased.

 From just looking at this graphs, HM looks like a buy. But as a dividend investor, I need to know if the dividend is safe.

Dividend safety

A huge warning sign would be if the debt has increased and if cash flow has been reduced. With a growing dividend, this could only mean that the company has to redo themselves so that they earn way more money than before (unlikely), or they have to get even more debt to cover the dividend. If that´s the case, I´m inclined to sell my position in HM B.

Baaah. Not good. As we can see the debt to equity has increased a lot, cash has been reduced and both equity ratio and current ratio is going down. For me, this means that the trend is negative, and HM B´s dividend is not safe. They might need to cut the dividend or hold the dividend growth (which direct means that the stock price also will hold or go down).


As a guy born and raised in Stockholm, I would love to see HM B perform better. However, while the stock might be a good buy at the current levels, the dividend is unsafe. The question one has to ask is if the huge inside buys from the CEO and the statements about growing and increased e-commerce should put enough faith in me that I hold on the stock even if the dividend growth is unsure. Moreover, with increased interest rates, having a ton of debt is bad. While long-term debt is partially okay (necessary to grow the business), short-term debt is scary.

In total, if one wanted to play safe, HM B looks like a scary bet. I need to do more research and think even more about this case before I decide to sell my position. Please, let me know what you think about HM B. What are you going to do with this “issue”?


[Update] I´ve sold my position in H&M. I see other alternatives that provide the same dividend income with lower risk.