STOCKHOLM: H&M opens new tab unexpectedly announced a change of leadership on Wednesday with company veteran Daniel Ervér taking over as CEO from Helena Helmersson as the Swedish fashion retailer’s performance lags those of bigger rival Inditex and fast-growing online player Shein.

Shares in H&M dropped 10% as the leadership change came as H&M said sales for December and January fell by 4% compared to the previous year, a bad sign for the key Christmas shopping period.

Helmersson, who quit after four years as CEO, said the role had been “very demanding”, telling journalists she did not have the energy to continue.Ervér, 42, has been at H&M for 18 years, most recently as head of the retailer’s core H&M brand, a role he will keep alongside the CEO job. In an interview with Reuters, the Swede said he had voiced his interest in the role in December and the board took the decision on Wednesday morning.

H&M to shut a fifth of Spanish stores, lay off 588 workers

The world’s second-biggest listed fashion retailer after Inditex, opens new tab, H&M has struggled to compete with Zara and low-priced fast fashion giant Shein, both of which have seen strong sales growth.

“I think the market will welcome the change after digesting the numbers,” said Adil Shah, portfolio manager at Storebrand in Oslo, which holds H&M shares.

“Speculation that margin targets will not be met is one of the reasons being stated for the CEO change,” he added.

H&M has focused on profitability rather than sales volumes recently as it aims to reach a 10% operating margin this year, and cuts costs by closing stores, opens new tab and laying off staff.

“The 10% goal on profitability stays, we will work hard to make that goal happen,” Erver told Reuters.

H&M’s fourth-quarter operating profit margin fell to 7.2% from 7.8% in the third quarter.

Measured in local currencies, sales from Dec. 1 to Jan. 29 - the start of its fiscal first quarter - fell by 4%, compared to an increase of 5% in the same period last year. Sales over the fourth quarter had also fallen 4%, more than the market expected.

Fourth-quarter operating profit was 4.33 billion crowns ($415.4 million), up from 821 million a year earlier but below the 4.57 billion expected by analysts in an LSEG poll.

JPMorgan analysts said the results were disappointing, and that the weakness of H&M’s fourth-quarter profit “slightly reduces (the) credibility” of the 10% margin target.

Karl-Johan Persson, H&M chairman and grandson of founder Erling Persson, said the company is in a strong position with “good conditions to make further improvements” this year. The Persson family has a 51% stake in H&M.The shares were down 10.4% at 150.8 Swedish krone by 1100 GMT, having risen about 29% in the last 12 months.