H&M shares tumble on surprise quarterly sales drop

Swedish fashion retailer H&M plans to speed up efforts to adjust to changes in the market, including closing more stores and opening fewer new ones.
Swedish fashion retailer H&M plans to speed up efforts to adjust to changes in the market, including closing more stores and opening fewer new ones.ST FILE PHOTO

STOCKHOLM • Fashion retailer H&M said yesterday that sales had fallen during the last three months as fewer shoppers visited its stores, sending its shares plummeting and underlining its struggle to adapt to a shift of business online.

Shares in the world's second-largest fashion retailer fell as much as 13 per cent to their lowest level since 2009.

The Swedish group said sales in the September-November period were far below its own expectations. It plans to speed up efforts to adjust to changes in the market, including closing more stores and opening fewer new ones, and to start selling the brand through Chinese online platform Tmall.

"The quarter was weak for the H&M brand's physical stores, which were negatively affected by a continued challenging market situation, with reduced footfall to stores due to the ongoing shift in the industry," the company said in a statement.

"In addition, there have been imbalances in parts of the H&M brand's assortment composition," it added, suggesting issues with product ranges.

H&M has seen inventories pile up over the past two years. Fourth-quarter sales shrank 4 per cent year on year, or 2 per cent in local currencies, to 50.4 billion kronor (S$8 billion), lagging a mean Reuters poll forecast for a 2 per cent increase, or 5 per cent in local currencies.

Main rival Inditex, the owner of Zara, has outperformed H&M and others in recent years, helped by a more flexible supply chain that allows it to adapt quicker to demand.

CHALLENGING ENVIRONMENT

The quarter was weak for the H&M brand's physical stores, which were negatively affected by a continued challenging market situation, with reduced footfall to stores due to the ongoing shift in the industry.

FASHION RETAILER H&M

This week, the Spanish company reported slower sales growth in the three months through October, but said sales growth had gained pace again last month.

Analysts have lowered their ratings on the H&M stock recently amid concerns that H&M won't be able, despite rapid online growth, to keep up with newer and nimbler pure-online players such as Zalando and Asos, and that comparable sales declines will extend into next year.

H&M's full quarterly earnings report is due on Jan 31.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 16, 2017, with the headline 'H&M shares tumble on surprise quarterly sales drop'. Print Edition | Subscribe