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H&M Disappoints in Third Quarter

Price reductions eat into profits amid weak retail business in "most markets."

PARIS – Hennes & Mauritz on Tuesday said the economy ate into third quarter profits and sales as it slashed prices to drive business.

 

The Swedish fast-fashion firm said net income climbed 4.8 percent to $489.4 million, or 3.33 billion kronor, in the three months through August on sales excluding sales tax of $3.07 billion, or 20.87 billion kronor, up 12 percent. The profit growth missed analysts’ expectations and investors sent the firm’s stock down as much as 11 percent in morning trading on the Stockholm stock exchange.

 

H&M, Europe’s second largest clothing retailer after Spain’s Inditex, said third quarter sales were “affected by a weaker retail business in most markets.” It said the firm “acted quickly during the quarter mostly through more active price reductions” in an attempt to drive traffic into its stores.

 

Europe, as in America, has experienced weak consumer confidence and spending as shoppers worry about their economic future. Earlier this month, Inditex, which runs the Zara chain, said declining European spending affected its third quarter performance. H&M said sales in August increased 8 percent in local currencies and that sales through Sept. 28 increased 9 percent, boosted by new openings, including its first store in Tokyo.

 

In September last year, H&M sales climbed 25 percent. By region,   sales grew 13 percent in Germany, H&M’s largest market, and 12 percent in the United States. In its home market of Sweden sales advanced 6 percent. Sales leapt 43 percent in China. H&M opened 26 stores in the quarter and consolidated 20 Monki and Weekday boutiques.