Mar 15, 2017
Reading time
2 minutes
Download the article
Click here to print
Text size
aA+ aA-

H&M posts first monthly sales drop in four years, shares fall

Mar 15, 2017

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.

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

H&M was expected to post better results than it did

That was in stark contrast to bigger rival Inditex, the owner of Zara, which reported earlier on Wednesday a 13% increase in the last six weeks.

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 and with Spain's Inditex less exposed to northern Europe than H&M, some of H&M's problems become clear.

But Inditex also has a larger share of sales from brands other than its flagship Zara brand and a larger share of sales in emerging markets.

H&M itself blamed a negative calendar effect of 4 percentage points that weighed on sales in February, which is the final month of the group's fiscal first quarter. Q1 sales were SEK47 billion (£4.2 billion), up from a year-ago SEK43.7 billion but below a SEK48.1 billion mean forecast in Reuters' poll of analysts.

Its shares were down 4.5% at 09:25 GMT to leave the stock down 17% over the past year.

"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.

The company did not comment further on the sales figures. It is due to publish its full Q1 report on March 30. The company in January launched a target for annual local-currency sales growth of 10% to 15% and said it expects to be within that range from this year on.

© Thomson Reuters 2022 All rights reserved.