H&M sales growth matches forecasts

STOCKHOLM: Shares in Sweden’s H&M, the world’s second-biggest fashion retailer, slipped on Friday after quarterly local-currency sales growth matched forecasts but failed to allay longer-term market concerns over margins and inventory.

H&M has seen profits shrink and inventories bank up in recent years as footfall slowed at its core-brand stores in the face of a shift online and mounting competition, while the firm has struggled to react quickly enough to demand swings.

It is investing heavily in logistics, digital technology, online offering and store concepts, and is reviewing its mix of stores and brands.

Local-currency sales rose for a third straight quarter in the December-February period, climbing 4 per cent from a year earlier, in line with the mean forecast in a Reuters poll of analysts.

H&M, whose main rival is market leader Inditex, said in a statement net sales were up 10 per cent to 51.0 billion crowns ($5.5 billion), versus expectations for an 8 per cent rise.

Shares however were down 4.6 per cent, taking them back to their lowest in two days after they climbed over the past week. “We think H&M is making progress on its recovery. However some expectations were for a stronger performance in February,” said RBC analyst Richard Chamberlain, who recently raised his rating on the stock to “sector perform”.

Chamberlain estimated there was a “very small” sales increase in stores open a year or more.

H&M, which is due to publish its full first-quarter earnings report on March 29, did not comment on the sales figures. The company’s investments to boost sales have taken their toll on profitability, and many analysts are unconvinced the company is yet back on track.

Reuters