by Marie Manes and Anna Ringstrom
STOCKHOLM (Reuters) – H&M reported lower-than-expected quarterly sales on Thursday as shoppers tightened their belts as energy and food bills rose and the world’s second-largest fashion retailer struggled to compete with rival Zara.
The Swedish group’s third-quarter net sales rose 3% from a year earlier at 57.5 billion crowns ($5.4 billion), less than the 5% analysts expected in a Refinitiv survey for the June-August quarter.
“The third quarter got off to a weak start, similar to the industry in many of the group’s key markets,” H&M, which does most of its business in Europe, said in a statement.
“Sales improved sequentially during the quarter, with a better start to fall collections than last year.”
When measured in local currencies, sales are down 4%.
“As we saw from Primark last week, we believe the more value-conscious end of the sector is proving particularly challenging in Europe with the exception of the UK, reflecting where pressures on household cash flow are most severe,” RBC analysts said in a note, citing German industry data showing Store sales decline in this period.
H&M has underperformed the company’s market leader Inditex (BME :), owner of Zara, which this week posted sales growth in terms of constant currency rates of 16% in the May-July quarter. However, the pace of growth for the Spanish group slowed down to 11% from August 1 to September. 11 period.
Inditex on Wednesday signaled more price increases this fall to offset rising costs, despite fears that demand will be dented by the cost of living crisis.
Shares in H&M, which are down 36% year-to-date at Wednesday’s close, were virtually unchanged in early trading. Analysts said it was on hold due to the company’s comment that its fall collections were well received.
H&M is scheduled to publish its full third-quarter earnings report on September 29.
(1 dollar = 10.7226 Swedish krona)