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H&M Misses Forecasts As Fast Fashion Pressure Builds

After decades of strong growth, H&M has repeatedly missed sales forecasts over the past year as pressure in the fast fashion market builds from its budget rivals and new online players.
H&M Spring/Summer 2017 | Source: Courtesy
By
  • Reuters

STOCKHOLM, Sweden — H&M reported slower than expected sales in May, the latest in a string of soft sales numbers from the world's second biggest fashion retailer, and said it had faced tough conditions in many of its markets early in the month.

After decades of strong growth, H&M has repeatedly missed sales forecasts over the past year while earnings have come under pressure from heavy investment and stiff competition from budget rivals and new online players.

H&M, second in size only to Zara owner Inditex, reported a 4 percent year-on-year rise in local currency sales for the month of May, missing a mean forecast for growth of 6 percent seen in a poll of analysts.

"In the first half of the month sales were affected by tough market conditions in several countries," the retailer, which is controlled by the founding Persson family, said in a statement. "Sales improved considerably in the second half of the month."

Inditex has outperformed H&M and other rivals over the past few years on the back of online growth and its flexible fast-fashion model. But while the market leader this week posted a 18 percent rise in first-quarter profit, it too saw sales growth slow slightly over the past month.

H&M shares are down 16 percent this year, sharply underperforming a 9 percent rise for Inditex.

"H&M has disappointed market expectations on sales trends for many months now," Societe Generale analyst Anne Critchlow said.

"The young value fashion market, in which the H&M concept operates, is very difficult, as we have seen from recent reports of sales and profit declines at chains in the UK, such as New Look and Arcadia."

May is the final month of the group's fiscal second quarter and H&M said net quarterly sales reached 51.4 billion Swedish crowns (£4.6 billion) for the period, up from a year-ago 46.9 billion but short of the 51.9 billion seen by analysts.

By Niklas Pollard and Johannes Hellstrom; editor: Adrian Croft.

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