Business

H&M reports larger-than-expected drop in sales in fourth quarter

The 4% decline for the quarter likely reflects a return to colder weather in October and November, group said

A man walks past a H&M store.

Fri Dec 15 2023 - 09:01

Swedish fashion retailer H&M on Friday reported a slightly larger-than-expected drop in September-November sales measured as the company aims to prioritise profitability.

Sales measured in local currencies fell 4 per cent, against analysts’ expectations of a 3 per cent decline.

However, the sales figure showed an improvement on the 10 per cent fall H&M warned of for September, when unusually warm weather hurt sales of autumn/winter collections across the apparel sector.

The 4 per cent decline for the quarter likely reflects a return to colder weather in October and November, Jefferies analysts said.

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The world’s second-biggest listed fashion retailer after Inditex, H&M has been prioritising its profit margin over sales, as it aims to reach an operating margin of 10 per cent in 2024.

H&M has been losing ground to Zara owner Inditex, which on Wednesday reported a 15 per cent rise in local-currency sales for the nine months through October, and a 14 per cent rise for the following six weeks.

H&M shares have outperformed Inditex this year, though, up around 56 per cent as investors bet on the company’s ability to bounce back after inflation dented its profitability.

H&M was slower to raise its prices than Zara, as its customer base is, on average, more price-sensitive.

But this year, price increases helped it raise its operating margin to 5.9 per cent for the first nine months of its financial year from 3.9 per cent over the same period last year.

In Swedish crowns, net sales for the quarter were roughly unchanged at 62.6 billion crowns (€5.6 billion) against a mean forecast of 63.2 billion.

H&M is scheduled to release full-year results on January 31st. – Reuters

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