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H&M Falls as Q3 Sales Miss Expectations Despite Gradual Improvement

By Geoffrey Smith

Investing.com -- Hennes&Mauritz (ST:HMb) shares fell in Stockholm in early trading on Thursday after the fast-fashion retailer reported another weak summer of sales.

The company said sales in the three months through August, adjusted for foreign exchange swings, fell by 4% from a year earlier. However, the Swedish krona's depreciation in that time allowed it to report a 3% gain to 57.45 billion kronor ($5.36 billion).

"The third quarter got off to a weak start, in common with the industry in many of the group’s major markets," H&M said. "Sales improved sequentially during the quarter, with a better start for the autumn collections than last year."

The preliminary numbers compare badly with those of its big rival, Zara owner Inditex (BME:ITX), where a 25% rise in sales drove profits 41% higher in the last quarter, giving it the confidence to push through price increases across its various ranges. H&M has been afflicted more than many of its rivals by supply chain problems that have left it with too much inventory in too many of the wrong places.

"The sales weakness during the quarter, compared with Inditex’s continued strength, means the 'critical' back-to-school period in September remains in focus for the market," said analysts at Jefferies in a note to clients. They expect sales in the current quarter to drop by 5%, despite the company's comments suggesting sales grew in September.

By 04:50 ET (08:50 GMT), H&M stock was down 1.6%, losing half of its gains over the last week. By comparison, Inditex stock has gained 6% over the last week.

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