H&M’s recovery continues as fourth quarter sales jump 9%

Swedish retailer has been investing in online services and new store concepts

Photograph: Regis Duvignau/Reuters

Photograph: Regis Duvignau/Reuters

 

Fashion retailer H&M said on Monday its sales rose 9 per cent in the fourth quarter, putting it on course to increase annual profits for the first time in four years following heavy investment in online and other services to adapt to a changing market.

Shares in the world’s second-biggest apparel group were up 2 per cent on Monday morning, outperforming the wider market in Stockholm.

They have now climbed 53 per cent this year on hopes the group has embarked on a road to recovery after slowing footfall at its core H&M-branded stores caused years of sliding group profits, mounting inventories and shrinking market value.

Over the past few years the Swedish-based retailer has invested in online services, new store concepts and independent brands to broaden its customer base and turn itself around.

H&M said its sales in September to November, its fourth quarter, were held back by the Black Friday shopping day falling later this year.

It said sales for the quarter rose 9 per cent to 61.7 billion crowns (€5.75 billion). Analysts had forecast a 10 per cent rise. In local currencies, growth was 5 per cent .

“Black Friday this year fell a week later, i.e. just before the end of the month of November,” H&M said in a statement.

“Therefore some of the big Black Friday online sales will not be recognised until December. The amount in question is expected to be approximately 500 million crowns.”

H&M said that adjusted for that, sales grew 10 per cent, or 6 per cent in local currencies and analysts said that stripping out the Black Friday impact, sales broadly matched expectations.

Rival Inditex, the world’s biggest clothing retailer and owner of the Zara chain, said last week its net profit grew 14 per cent in the three months through October, helped by sales growth of 9 per cent according to Reuters’ calculation and shrinking inventories.

RBC analyst Richard Chamberlain, with an “outperform” rating on H&M’s shares, said H&M’s sales figures indicated the retailer had gained share in major markets such as Germany, H&M’s biggest market, where industry-wide in-store sales shrank by an estimated 4 per cent.

In the third quarter, H&M had increased profit for the first time in more than two years as heavy spending to meet changes in the market helped sales reach 8 per cent growth in local currencies - a pace last seen three years ago.

Analysts expect full-year profits to grow for the first time since 2015, despite still-high inventory and investment levels.

H&M, which is controlled by the founding Persson family, is scheduled to publish its full earnings report on January 30th. – Reuters