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H&M's Q4 Sales Slow more than Expected

  • H&M sales lag rival Inditex
  • Sept-Nov local currency sales down 4% vs forecast 3% fall
  • Retailer trying to increase margin to 10% next year

STOCKHOLM, Dec 15 (Reuters) - H&M's local-currency sales fell in the fourth quarter as the Swedish fashion retailer loses ground against Zara owner Inditex, which reported a sales boost earlier this week.

H&M's sales fell 4%, against analysts' expectations for a 3% decline. It was the biggest drop since the third quarter of last year.

Inditex on Wednesday reported a 15% rise in local-currency sales for the nine months through October, and a 14% rise for the following six weeks.

However, H&M's figure was an improvement on the 10% fall it warned of for September, when unusually warm weather hurt sales of autumn/winter collections across the sector.

The 4% quarterly decline likely reflects a return to colder weather in October and November, Jefferies analysts said. Shares in H&M were little changed in early trading.

The world's second-biggest listed fashion retailer after Inditex, H&M has been prioritising its profit margin over sales, aiming to sell more expensive products and do less discounting, as it strives to reach an operating margin of 10% in 2024.

H&M shares have outperformed Inditex this year, though, up around 56% as investors bet on the company's ability to bounce back after inflation dented its profitability.

H&M was slower to raise its prices than Zara, as its customer base is, on average, more price-sensitive.

But this year, price increases helped it raise its operating margin to 5.9% for the first nine months of its financial year from 3.9% over the same period last year.

The improvement may not be enough for some, however.

"I'm not sure how well investors would take it if topline continued to be negative and margin improved," said William Woods, analyst at Bernstein.

In Swedish crowns, net sales for the quarter were roughly unchanged at 62.6 billion crowns ($6.10 billion) against a mean forecast of 63.2 billion.

H&M is scheduled to release full-year results on Jan 31.

Reporting by Anna Ringstrom and Helen Reid Editing by Jason Neely and Mark Potter

Source: Reuters

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