H&M posts first monthly sales drop in 4 years

STOCKHOLM: H&M, the world’s second largest clothing retailer, posted a surprise drop in sales last month, the first such decline in four years sending its shares 4.5% lower.

The Swedish budget fashion firm said local-currency sales fell 1% year-on-year in February, against a forecast in a Reuters poll of analysts for a 6% rise.

That was in stark contrast to bigger rival Inditex the owner of Zara, which reported earlier yesterday a 13% increase in sales from Feb 1 to March 12.

The total apparel market in H&M’s biggest market Germany shrank 9% in February, according to a survey of retailers conducted by Textilwirtschaft and published on March 8.

Spain’s Inditex is less exposed to northern Europe than H&M and has a larger share of sales from brands other than its flagship Zara brand. It also has a larger share of sales in emerging markets.

“I think market conditions are the main driver of the weak February number,” UBS analyst Adam Cochrane said, adding investors also fear H&M is losing market share.

H&M, which saw sales growth slow and profits fall last year, is branching out into more brands to reach more customers and investing to improve its online services in response to tougher competition in its budget segment and from online-only players.

It said a negative calendar effect of 4 percentage points weighed on sales in February, which is the final month of the group’s fiscal first quarter.

Fiscal first-quarter sales were 47.0 billion crowns (US$5.25bil), up from a year-ago 43.7 billion but below a 48.1 billion mean forecast in Reuters’ poll of analysts.

H&M, which did not comment further on the sales figures, is due to publish its full fiscal first-quarter report on March 30.

The company in January launched a target for annual local-currency sales growth of 10%15% and said it expected to be within that range from this year on. — Reuters