H&M annual sales growth lags rival Inditex

STOCKHOLM – Revenue at world number two fashion retailer Hennes & Mauritz rose 10 percent this year, lagging forecast growth at larger rival Inditex which is less exposed to the downturn in Europe.

Sweden’s H&M has the bulk of its business in the region, where a sovereign debt crisis and government austerity measures have dampened demand.

Inditex, which owns Zara and other chains, has a larger share of sales than H&M in faster-growing emerging markets and is less exposed to cost inflation in Asia.

H&M on Monday posted a smaller-than-expected drop in sales at stores open a year or more in November, the end of its financial year.

Fourth-quarter figures published at the same time would take revenue for the whole year to 120.8 billion Swedish crowns ($18 billion), according to Reuters calculations, a 10 percent rise on 2011.

That’s less than the 16 percent rise Inditex is expected to report in its current financial year to the end of January, according to Thomson Reuters Starmine data.

Starmine forecasts put Inditex’s total revenue at 16 billion euros ($21 billion).

Citi analyst Richard Evans said a weak euro and likely product investments would probably limit H&M’s earnings growth in 2013 to mid-single digits, repeating a neutral stance on H&M’s shares.

Evans said its figures on Monday did not alter his expectations for full-year 2013 sales of 132.7 billion crowns and pretax profit of 24.5 billion. The Starmine median forecast is for revenue of 133 billion crowns.

H&M said local currency sales at stores open a year or more shrank 1 percent in November, less than a Reuters poll forecast for a 3 percent drop and were up 1 percent in the year as a whole.

The sales drop was the second one in a row after a 5 percent dip in October.

Total sales in November including new stores were up 7 percent from a year earlier in local currencies, just above forecast, for a total year rise of 11 percent.

“Sales are marginally better than we expected but probably at a cost to margin,” said Credit Suisse analyst Simon Irwin, adding that H&M had probably been cutting prices in promotions to get rid of stock in November.

He stuck to forecasts for full-year 2013 like-for-like local currency sales growth of 2 percent and total sales growth in crowns of 10.4 percent.

Turnover in the September-November quarter, which H&M published ahead of the full-year earnings report on Jan.30, rose 5 percent from a year earlier to 32.5 billion crowns, matching expectations.

H&M’s shares were up 2.8 percent at 1148 GMT, taking a year-to-date rise to 0.8 percent while the STOXX Europe 600 retail index is up 9 percent.

Inditex, which H&M trails by value and turnover as well as by the number of markets and stores, has soared 66 percent so far this year.


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