Hennes & Mauritz AB (HM-B.SK) Wednesday posted March sales below expectations, though the broader fashion retail market is showing tentative signs of recovery in some of H&M's key countries.

"It was clearly below expectations," said Anders Wiklund, a retail analyst with Evli Bank in Stockholm.

At 0732 GMT, the company's shares were down 7 Swedish kronor, or 2%, at SEK340.50, slightly underperforming a 1.7% decline for the OMX index of the 40 biggest Nordic companies. Since the start of the year, H&M's shares are up 12%, compared with a 1.9% rise for the OMXN40.

Sweden's H&M, the world's third-largest fashion chain by revenue behind U.S.-based Gap Inc. (GPS) and Spain's Inditex SA (ITX.MC), said March same-store sales fell 3%.

Eight analysts polled by Dow Jones Newswires on average had forecast sales in stores open longer than a year to fall 0.3%.

H&M's total sales, which include sales in new stores, rose 6%, missing analysts' forecast of 9.6%.

Wiklund said that factors that hurt H&M in March may include it being pressed by rivals to sell clothes at a discount, and colder weather than in March 2008.

"You don't buy spring clothes if it's cold," he said. "It can be enough that pay weekend is cloudy and the company will lose some percentage in sales."

He also said there may have been a "negative Easter effect." Easter took place in March 2008 but in April of this year, potentially making the comparison figures this year tougher. Analysts say that the Easter holiday tends to boost sales in some countries and hurt sales in others.

Global fashion retail sales have struggled in recent months as increasingly cost-conscious consumers have reined in spending.

However, in Germany, H&M's biggest market - where it generates a quarter of its revenue - overall clothing sales fell only 1% in March, a stark improvement over the 11% drop in February, according to industry journal Textilwirtschaft.

In Sweden, H&M's third-biggest market, March overall clothing sales fell 1.8%, according to the Swedish Retail Institute, up from a 4% drop in February.

J.P. Morgan said in a statement that "H&M's sales are likely to have been dragged down by weaker sales in the Nordic region, the U.K. and the U.S."

Evli Bank's Wiklund said he expects the broader fashion retail market to stay negative through 2009.

The number of H&M stores as of March 31 totaled 1,767, up 14% from 1,546 a year earlier.

H&M later this month will start selling the new spring collection created by Britain's Matthew Williamson, the latest in a string of famous guest designers hired by the company to boost sales. H&M plans to introduce his spring collection for women April 23 in about 200 stores, followed later by a broader collection in nearly all stores.

Company Web site: http://www.hm.com

-By Ola Kinnander, Dow Jones Newswires; +46-8-5451-3097; ola.kinnander@dowjones.com