Inventory woes hurt growth in H&M sales

Retailer struggling as its clothes fall out of favor with shoppers.

Hennes & Mauritz’s sales growth slowed in the key July and August months, hampering the Swedish retailer’s attempt to end a threeyear slump in earnings.

Sales growth probably slowed to 6% in those two months from 12% in June, Berenberg analysts said, based on calculations from figures H&M reported Monday. The shares dropped as much as 3.2%.

H&M has been trying to reducing its high inventory level, which stood at 40 billion kronor ($4.2 billion) at the end of June. The retailer has struggled in recent years as its clothes fell out of favor with shoppers and it launched a plethora of new formats.

Rival Inditex SA this month reported an acceleration in sales, while Primark announced a drop in like-for-like revenue. H&M has recently slashed prices to as low as $5.99 for skinny jeans and $17.99 for a dress with a belt.

The retailer said its summer collections were well-received and it managed to increase market share. The sales increase of 8% in local currencies during the quarter shows that part of the revenue growth is coming from foreign-exchange moves. A weaker krona makes it more expensive to source goods from Asia, which could be cutting into profitability.

H&M was facing easy comparisons with the year-earlier quarter, when logistics issues exacerbated its inventory woes.

The stock has advanced 47% this year. H&M’s stock can be volatile because short sellers have bet against about a sixth of the company’s freely traded shares, according to IHS Markit data. H&M is scheduled to report full earnings on Oct. 3.