H&M slips out of fashion as first-quarter sales lag

H&M, the world’s second-biggest fashion retailer, reported on Wednesday (Mar 15) a smaller-than-expected increase in sales over the period December to February, in the latest sign it is struggling to compete with Zara-owner Inditex.

Shares in H&M were down 6 per cent in early trade, underperforming the wider Swedish market. Year-to-date they are still up 12 per cent.

The Swedish group said sales measured in local currencies for the period, its fiscal first quarter, rose 3 per cent from a year earlier.

Analysts at Jefferies said local-currency sales, the figures most watched by markets, were significantly lighter than consensus estimates and implied that sales in reality fell 3 per cent in February.

H&M said net sales were up 12 per cent from a year earlier to 54.9 billion krona (S$7.1 billion).

Excluding Belarus, Russia and Ukraine, the rise in net sales was 16 per cent, and, in local currencies, 7 per cent, the company said in a statement.

Budget player H&M’s profits fell last year as it did not fully pass on soaring raw material, freight and energy costs in an attempt to retain its price-sensitive customers.

By contrast, market leader Inditex reported on Wednesday a 13.5 per cent increase in Feb 1 – Mar 13 sales and a 27 per cent net profit increase for its fiscal year through January.

Analysts said demand for Zara’s clothes had continued even after a price rise of 5 per cent or more last year.

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H&M, which is in the middle of a programme to reduce staff and cut other costs, will publish its full quarterly report on Mar 31. REUTERS