December 17, 2018 / 7:14 AM / a month ago

H&M quarterly sales rise but doubts about turnaround weigh

STOCKHOLM (Reuters) - H&M (HMb.ST) reported on Monday sales growth in the three months to November but doubts about the strength of recovery at the world’s second-biggest fashion group sent its shares down.

FILE PHOTO: The logo of Swedish fashion label H&M is seen outside a store in Vienna, Austria, October 1, 2016. REUTERS/Leonhard Foeger/File Photo

The Swedish group said local-currency sales in the September-November period rose 6 percent from a year earlier, just below the mean forecast in a Reuters poll. It followed a pick up in sales in the June to August quarter.

But H&M, whose rivals include market leader and Zara-owner Inditex (ITX.MC), is still heading for a third year of falling profits due to slowing footfall at its core brand’s stores, which are struggling against mounting high-street and online competition.

H&M’s shares fell 5.9 percent by 0855 GMT, with the sector overall weighed down by Monday’s profit warning from British online fashion group ASOS (ASOS.L).

“It is not completely clear given the softness of the prior year comparative whether or not H&M is experiencing a product-led recovery thanks to new management within the H&M concept,” Societe Generale analyst Anne Critchlow said.

H&M, whose sales unexpectedly shrank a year ago, said net sales in the three-month period were up 12 percent to 56.4 billion crowns (4.94 billion pounds). But it did not give details.

Two analysts estimated sales growth in stores open a year or more amounted to 3 percent.

After sales in the June-August quarter beat expectations, the company had said new collections were well received and markdowns would probably not increase in the fourth quarter of its financial year.

H&M has in previous years had to mark down prices as inventories climbed due to slowing sales and the inability of the firm’s supply chain to react fast enough to demand swings.

Analysts at Jefferies said there was still a “lack of compelling evidence that the recovery journey is now truly underway”, adding that a full assessment of progress would have to await the end-of-year figures.

H&M’s shares have strengthened in recent months on hopes of a break in the trend after they lost two thirds of their value since 2015. But the drop on Monday marked a setback.

Inditex (ITX.MC), which for years outperformed the sector, has seen sales growth slow. Its profit and sales for the nine months through October lagged forecasts, which it blamed on the weather and currency swings. Local-currency growth was 7 percent.

Reporting by Anna Ringstrom; Editing by Kirsten Donovan and Edmund Blair

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