H&M Q4 Sales Grow 6% in Local Currencies

The Swedish retailer has been investing heavily in technology to speed up deliveries.

PARIS — Hennes & Mauritz AB Monday reported a 6 percent rise in fourth-quarter sales in local currencies, further throwing the spotlight on discounting measures from retailers during the choppy holiday season.

The Swedish fast-fashion retailer, which has been restructuring its business to better suit an e-commerce era, reported sales of 65.45 billion Swedish kronor, or $7.2 billion.

The sales rise for the Sept. 1 to Nov. 30 period, excluding VAT tax, was 12 percent, the company said.

The sales figure slightly beat RBC Europe’s estimates but were a little bit behind consensus estimates, said analyst Richard Chamberlain in a research note to clients.

Closing down 8.5 percent at 142.80 Swedish kronor per share, H&M shares traded lower along with other retailers in Europe.

Chamberlain noted discounting seen in much of the sector over the period will likely eat into margins. H&M, which releases full-year results on Jan. 31, did not provide further details Monday.

“Black Friday [promotions] varied by market, and overall, we think increased Black Friday sales are a negative for margins for apparel retailers like H&M as it makes it more difficult to get back to full-price sales in December,” Chamberlain said. September was difficult for retailers and November sales were lower than expected, he added. The analyst thinks the company has likely cleared its inventory backlog in the U.S., but still lagged the strong apparel sector there.

Spanish retailer Inditex, which has sprinted ahead of rivals in the digital sphere with a focus on high-tech sales and logistics systems, opted out of the price-slashing frenzy seen in recent weeks, saying it prefers to focus on margins and keeping a tight rein on inventories. Inditex sees future growth in the integration of online and physical stores and aims to offer online commerce to all markets by 2020.

Volker Bosse, analyst with Baader Helvea, also flagged a disappointing Christmas season so far in Europe, citing a cooling down on business expectations and consumer confidence. “Unfilled expectations,” noted Bosse, in reference to the first three pre-Christmas holiday weekends.

H&M has in recent months redirected resources from expanding its store network to revisiting store formats, while investing heavily in technology to speed up deliveries and revamp its logistics systems for online commerce. Online growth rates of more traditional retailers like Inditex and H&M have exceeded pureplay online peers, noted RBC in a research note on European apparel retail.

“We think this reflects the incumbent’s broader reach online and the improvements they have made to their service and delivery options,” the analysts said.

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