H&M disappoints with 'flattish' third-quarter sales

(Sharecast News) - Shares in H&M Group came under pressure on Friday, after the Swedish retailer posted lacklustre quarterly sales. The fashion giant, which also owns Cos, Weekday and Monki, among other brands, said net sales increased 6% year-on-year to SEK60.9bn (£4.4bn) in the three months to 31 August. Analysts had been expecting sales closer to SEK63.5bn.

In local currencies, net sales were "flattish", well below market forecasts for growth of around 5%.

As at 1000 BST, shares in H&M were down 5%.

The firm is facing tough competition from both its closest rival Inditex - the Spanish owner of Zara - and cheaper fast fashion brands. On Wednesday, Inditex reported better-than-expected interim profits.

H&M said: "The work towards the company's goal of reaching a 10% profit margin in 2024 is going in the right direction. Profitability and inventory levels have been prioritised in the quarter."

Victoria Scholar, head of investment at Interactive Investor, said: "H&M has been cutting costs to adapt to its cost inflation headwinds from wages, energy and materials. However, the retailer has struggled to keep up with Zara, its biggest rival, as well as other fast fashion cheaper e-commerce competitors.

"Zara has a competitive advantage over H&M partly because it owns its factories, meaning it has a stronger ability to deliver the latest fashion trends to consumers and can adapt more quickly to changing demand."