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

STOCKHOLM (Reuters) -H&M, the world’s second-biggest fashion retailer, reported on Wednesday 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 (BME:).

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

The Swedish group said sales measured in local currencies for the period, its fiscal first quarter, rose 3% 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% in February.

H&M said net sales were up 12% from a year earlier to 54.9 billion crowns ($5.26 billion).

Excluding Belarus, Russia and Ukraine, the rise in net sales was 16%, and, in local currencies, 7%, 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% increase in Feb. 1 – March 13 sales and a 27% 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% or more last year.

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