H&M said unusually hot weather in many of its European markets had delayed the start of the autumn shopping season, sending sales lower in September, while cost cuts helped the fashion retailer’s quarterly profit rise.

H&M, whose biggest rival is Zara owner Inditex, said September sales would be down 10 percent year-on-year measured in local currencies. That compares with Inditex reporting sales between Aug. 1 and Sept. 11 that were up 14 percent.

The decline deals a blow to hopes the world’s second-biggest fashion retailer is turning its performance around after lagging behind Inditex, as a cost-of-living crisis curbs shoppers’ spending.

“If the sales at your competitor basically go up by 14 percent with the same weather, that tells you something, to my mind,” said Vera Diehl, portfolio manager at Union Investment, which holds shares in both H&M and Inditex.

H&M’s shares rose 5 percent in early trade, however, as profits in the June-August quarter jumped and H&M stuck to a goal of increasing its operating margin to 10 percent next year and said its cost-cutting programme was continuing “at full speed.”

In 2022, the margin was 3 percent. In the third quarter, the margin reached 8 percent from a year-earlier 2 percent.

The target is “challenging but achievable,” Barclays analyst Nicolas Champ said, adding that it would, however, require some acceleration in top-line growth.

Operating profit in the Swedish group’s third quarter jumped to 4.74 billion crowns ($431 million) from a year-earlier 902 million. Analysts polled by LSEG had on average forecast a 4.72 billion crown profit.

The year-ago figure included a one-off cost of 2.1 billion crowns for the group’s exit from Russia, which also accounted for four percentage points of the 10 percent September sales decline.

“We believe H&M is very much in ‘trading sales for profits’ mode which is leading to margin improvement but some pressure on volumes,” RBC analyst Richard Chamberlain said. “It appears to be losing some like-for-like share in major markets.”

H&M also said it had this month returned to JD.com, one of China’s biggest e-commerce marketplaces, after a prolonged absence due to criticism over its stance on alleged human rights abuses in China’s Xinjiang region.

It returned to Alibaba’s Tmall e-commerce platform last year, but has not been available on JD.com since 2021.

H&M announced a share buyback programme starting on Wednesday, planning to buy back up to 3 billion crowns of stock by March 31 next year.

By Anna Ringstrom and Helen Reid; Editors: Jan Harvey and Mark Potter

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