Budget fashion retailer Hennes & Mauritz has reported a rise in sales in August that was little more than half of what analysts had expected, with the company saying unusually hot weather in key markets had kept shoppers away in the second half of the month.
The news cast some doubt over the extent of a recovery later this year which has been widely expected by analysts and flagged by Chief Executive Karl-Johan Persson after years of tightening margins and several quarters of profit falls.
H&M (HMRZF) is the world’s second-biggest clothing retailer after Spain’s Inditex (ZTSTF), the owner of Zara.
The Swedish group, which has the bulk of its business in Europe, said local-currency sales in August, the last month of its fiscal third quarter, was up 7% from a year ago, well short of the 13% average forecast given by analysts in a Reuters poll.
“Sales development in August had a very good start. But sales were negatively affected in the second half of the month by exceptionally hot weather in most of the group’s markets,” the company said in a statement.
Shares in the firm were down 2.4% at 253 crowns by 0715 GMT.
The overall clothing market in Germany, H&M’s single-biggest market, was down 3% in August, according to Textilwirtschaft industry data.
Societe Generale analyst Anne Critchlow estimated H&M’s comparable sales shrank 2% in the month and predicted a continued decline in its operating profit margin.
“Weather was certainly unhelpful across northern Europe, being too warm for the launch of the transitional autumn/winter ranges at full price and this has continued into September,” she said.
“We expect much stronger current trading for Inditex when it reports current trading next week: we are looking for 9% like-for-like for the 6 weeks to mid-September at Inditex.”
H&M has seen profits fall in each of the last three quarters, with a number of factors seen at play, including more competition in the budget segment of the clothing market and high purchasing costs in Asia due to a stronger dollar as well as the costs of making large long-term investments in online technology and new brands.
The August sales figures were helped by an easy comparison, being the first month since September 2015 that growth was faster than the same month in the previous year.
H&M said net sales in the last three months totalled 49 billion crowns ($5.8 billion), up from 46 billion in the same period a year ago but below a forecast 50 billion.