H&M sales miss as retailer struggles to compete with Zara

[September 15, 2022]  By Marie Mannes and Anna Ringstrom

STOCKHOLM (Reuters) -H&M reported on Thursday lower-than-expected quarterly sales as shoppers tighten their belts with energy and food bills soaring and the world's second-biggest fashion retailer struggles to compete with rival Zara.

Third-quarter net sales at the Swedish group were up 3% from a year earlier at 57.5 billion crowns ($5.4 billion), short of the 5% which analysts polled by Refinitiv had forecast for the June-August quarter.

"The third quarter got off to a weak start, in common with the industry in many of the group's major markets," H&M, which does the bulk of its business in Europe, said in a statement.

"Sales improved sequentially during the quarter, with a better start for the autumn collections than last year."
 

Measured in local currencies, sales were down 4%.

"As we saw from Primark last week, we think the more value conscious end of the sector is proving very challenging in Europe ex-UK, reflecting where pressures on household cashflow are most acute," RBC analysts said in a note, noting German industry data showing falling store sales in the period.

The H&M clothing store is seen in Times Square in Manhattan, New York, U.S., November 15, 2019. REUTERS/Mike Segar/File Photo GLOBAL BUSINESS WEEK AHEAD

H&M's performance substantially underperformed market leader Inditex, the owner of Zara, which this week posted sales growth in constant currency terms of 16% for its May-July quarter. The Spanish group's growth pace however slowed to 11% in the Aug.1-Sept. 11 period.

Inditex on Wednesday flagged further price hikes this autumn to offset soaring costs, despite worries demand would wane due to the cost of living crisis.

Shares in H&M, which were down 36% year-to-date at Wednesday's close, were roughly unchanged in early trade. Analysts said it was holding up due to the company's comment that its autumn collections have been well received.

H&M is due to publish its full third-quarter earnings report on Sept. 29.

($1 = 10.7226 Swedish crowns)

(Reporting by Marie Mannes and Anna Ringstrom; editing by Stine Jacobsen, Jason Neely and Emelia Sithole-Matarise)

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