WWD.com/beauty-industry-news/financial/hms-july-sales-dip-3-percent-2243448/
government-trade
government-trade

H&M Same-Store Sales Drop in July

New H&M stores boost increase to 7 percent for month.

Swedish fast-fashion chain Hennes & Mauritz on Monday reported a worse-than-expected dip in same-store sales as it continues to feel the effect of consumers’ shrinking budgets.

This story first appeared in the August 18, 2009 issue of WWD.  Subscribe Today.

In July, sales from stores open for at least a fiscal year declined 3 percent compared with expectations of a 0.5 percent fall.

Total sales, which include sales from new stores, rose 7 percent, helped by H&M’s continued expansion into new markets, such as Japan and Russia. At the end of July, H&M operated 1,828 stores, compared with 1,601 a year earlier.

“On the back of these results, we do not expect consensus forecasts to change,” said Citi analyst Richard Edwards, noting H&M’s July sales are consistent with his forecast of a 4 percent sales decline in the second half of 2009.

H&M, the world’s third-largest fashion chain by revenue behind U.S.-based Gap Inc. and Spain’s Inditex, doesn’t provide actual sales figures, but only releases percentage changes for its monthly sales updates.

In June, H&M’s comparable sales slipped 5 percent while total sales were up 4 percent, suggesting markets remain tough despite some early signs of recovery from the downturn.

Although the Swedish company has managed to weather the economic slide better than mid-market competitors thanks to its low prices, on-trend designs and fast-moving inventories, it hasn’t been immune to the slowdown in consumer spending brought on by the recession. However, H&M has resisted the temptation of sizable markdowns in order to preserve margins.

In the second quarter, the company continued to gain market share, reporting a better-than-expected 6.4 percent increase in net profits, helped by store openings and successful spring collections.

Gross margin, a key indicator of retailers’ profitability, declined to 61 percent from 62.9 percent in the second quarter.

The Swedish retailer is due to unveil a one-off collection by red-carpet staple Jimmy Choo at selected H&M stores in November.