H&M declines as third-quarter sales miss expectations despite gradual improvement

H&M declines as third-quarter sales miss expectations despite gradual improvement

By Jeffrey Smith – Shares of Hennes & Mauritz (ST 🙂 fell in Stockholm in early trade on Thursday after the fast-fashion retailer reported weak sales in another summer.

The company said sales in the three months to August, after adjusting for exchange rate fluctuations, were down 4% from a year earlier. However, the devaluation of the Swedish krona at the time allowed it to report a 3% gain to 57.45 billion kroner ($5.36 billion).

“The third quarter got off to a weak start, similar to the industry in many of the group’s key markets,” H&M said. “Sales improved sequentially during the quarter, with a better start to fall collections than last year.”

The raw numbers compare poorly with those of its big competitor, owner Zara Inditex (BME :), which led to a 25% increase in sales last quarter, giving it the confidence to drive price increases across its various ranges. H&M has been hit more than many of its competitors by supply chain issues that have left it with too much inventory in the wrong places.

“Weaker sales during the quarter, compared to Inditex’s continued strength, mean that the ‘crucial’ back-to-school period in September remains in market focus,” Jefferies analysts said in a note to clients. They expect sales in the current quarter to decline 5%, despite the company’s comments pointing to sales growth in September.

By 4:50 ET (08:50 GMT), H&M stock was down 1.6%, losing half of its gains over the past week. In comparison, Inditex stock is up 6% over the past week.

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