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H&M hit by flat sales in ‘challenging’ quarter as it lowers profit forecast

H&M hit by flat sales in ‘challenging’ quarter as it lowers profit forecast

H&M Group has posted flat sales in the UK and across key European markets in its third quarter as colder weather in June hit trading.

For the three months to 31 August, the fashion giant saw global net sales slip 3% to SEK 59bn (£4.3bn) from SEK 60.9bn (£4.5bn) last year. In local currencies, sales were flat. Gross profit for the quarter was SEK 30.1bn (£2.2bn), with a margin of 51.1%, up from 50.9% last year.

As a result, the group changed its outlook, and now expects operating margin for the year to be below 10%, down on its previous earnings targets.

H&M CEO Daniel Ervér said: “The quarter started with slow sales in June due to cold weather in many of our key European markets. In July and August we saw sales pick up, with even stronger sales development in September.”

“Despite a challenging start, we are concluding the third quarter with sales on par with last year in local currencies and with good cost control.”

For the nine months, net sales remained flat in local currencies at SEK 172.3bn (£12.7bn), with around 30% of its total sales coming from online channels.

Western Europe, including the UK, saw net sales drop 4% in the quarter, while year-to-date sales remained flat.

Despite the sales challenges, H&M said its autumn collection has been very well received and sales in September are expected to increase by 11% in local currencies compared with the same month the previous year.

Ervér said: “The autumn collection represents the best of H&M: fantastic fashion and good quality at the best price, in a sustainable way. With an even better experience in both our digital and many of our physical stores, as well as collaborations and unique events, we’ve raised the bar for H&M.”

H&M has faced intense competition from the likes of Zara owner Inditex, which managed to buck the trend of fashion retailers hit by wet weather as its first-half profit rose 10% earlier this month.

Despite this, Ervér continued: “2024 is a year in which we’re laying the foundation for future growth. We’re increasing the pace of improvements in our customer offering and deprioritising things that don’t strengthen our brands or contribute to our sales and profitability.

“Consumers’ living costs have remained high during the year, and at the same time we continue to see turbulence in the world around us. External factors have impacted our sales revenue and purchasing costs more than we expected. At present we estimate that this year’s operating margin will be lower than 10%.

“We are strengthening the H&M brand by investing in products, the shopping experience and marketing, which we are already seeing start to make an impact and which will contribute to increased sales and profitability.”

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