HM Faces Sales Setback: Swedish fashion retailer H&M experienced a 4% decline in local-currency sales in the fourth quarter, falling short of analysts’ expectations for a 3% decrease. This drop, the most significant since Q3 of the previous year, comes as rival Inditex, owner of Zara, reported a robust boost in sales earlier this week. Inditex achieved a 15% rise in local-currency sales for the nine months through October and continued with a 14% increase for the subsequent six weeks.
H&M’s quarterly decline, although improved from the anticipated 10% fall in September due to unseasonably warm weather impacting autumn/winter collections, is attributed to the return of colder weather in October and November. The retailer has been prioritizing profit margin over sales, focusing on selling higher-priced products and reducing discounting, with the aim of reaching a 10% operating margin by 2024.
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Despite the recent setback, H&M shares have outperformed Inditex this year, climbing around 56%. This resilience is driven by investor confidence in the company’s ability to rebound after facing challenges from inflation that impacted its profitability. While H&M was initially slower than Zara to raise its prices, recent adjustments contributed to an operating margin increase to 5.9% for the first nine months of the financial year, compared to 3.9% over the same period the previous year.
However, some analysts express caution, suggesting that further negative growth in topline figures may raise concerns among investors, even with an improved margin. H&M’s net sales for the quarter, when expressed in Swedish crowns, remained approximately flat at 62.6 billion crowns ($6.10 billion), slightly below the mean forecast of 63.2 billion. The retailer is scheduled to release its full-year results on January 31.