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H&M shares tumble on surprise quarterly sales drop

Shares now at lowest level since 2009

H&M’s 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 more quickly to demand.

Fri Dec 15 2017 - 12:23

Fashion chain H&M’s sales fell unexpectedly in the past three months as it attracted fewer shoppers to its stores, sending its shares plummeting and underlining its struggle to adapt to a shift to online retail.

Shares in the world’s second-largest clothing group have been on a downward slope since 2015 amid shrinking comparable sales. They fell another 15 percent on Friday to the lowest level since 2009, taking the year-to-date fall to a third. Trading volumes soared, with volumes at 2.5 times the 30-day daily average.

H&M said it would speed up efforts to adjust to changes in the market, including closing more H&M stores and opening fewer new ones, and start selling its core budget H&M 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.

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“In addition, there have been imbalances in parts of the H&M brand’s assortment composition,” it added, indicating issues with its clothing ranges. H&M has seen inventories pile up over the past two years.

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 more quickly to demand.

Fourth quarter sales shrank 4 per cent year-on-year, or 2 per cent in local currencies, to 50.4 billion crowns ($5.97 billion), in the three months to the end of November, lagging a mean Reuters poll forecast for a 2 per cent increase, or 5 percent in local currencies.

It was the first time since at least 1998 that quarterly local-currency sales shrank, an H&M spokeswoman said.

- Reuters

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