H&M sales up but warn of excess stock

H&M said third quarter sales were up 22% from last year, but warned that relatively weak sales in April and May had left a stockpile of unsold spring garments. The Financial Times warned his could lead to heavier discounting than previously

planned over the summer, the company warned.

The Stockholm-based company, the world’s third-largest fashion retailer, behind Gap of the US and Inditex of Spain, attributed the sluggish spring sales to unusually cold weather across its key northern European markets during the period.

Second-quarter net profits rose almost a quarter from last year to SKr5.21bn, narrowly below analysts’ consensus forecasts. But the gross margin was slightly better than expected at 65.9 per cent with the company benefiting from lower purchasing costs because of a weaker dollar.

Investors are looking closely at European retailers for any sign of renewed weakness in consumer spending as countries including Spain and the UK announce aggressive budget cuts to reduce deficits. Eurozone retail sales fell 1.2 per cent in April.

H&M said its second-quarter sales had risen 2 per cent to SKr27bn, helped by a wave of store openings across Europe, the US and Asia. But like-for-like sales – those made in outlets open for more than a year – fell 4 per cent in May, almost twice the drop analysts had forecast.

Shares in H&M were down about 4 per cent on Thursday morning at SKr223.10, but they remain up by almost a quarter from a year ago.

The company, known for its “cheap chic” style and collaborations with high-profile designers, said it remained committed to an aggressive expansion strategy that would see 180 stores open during the second half, mostly in Europe, the US and China. It currently operates more
than 2,000 outlets in 35 countries.

Image: H&M campaign