Fashion retailer Hennes & Mauritz AB (HM-B.SK) Wednesday reported a worse-than-expected drop in comparable store sales in June, indicating it's still being hurt by consumers reining in spending amid the economic slowdown.

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 June same-store sales fell 5%, missing analysts' forecasts.

Seven analysts polled by Dow Jones Newswires on average had predicted sales in stores open longer than a year would fall 1.4%.

H&M's total sales, which include sales in new stores, rose 4%, underperforming analysts' forecast of 8.4%. H&M reports only percentage changes for its monthly sales, not actual revenue.

Evli Bank analyst Anders Wiklund said he expected shares to open lower, as both same-store and total sales disappointed.

Its shares closed Tuesday at 390 Swedish kronor ($50). Since the start of the year they have risen 21%, outperforming the 6.1% gain for the OMX index of the 40 biggest Nordic companies.

H&M is feeling the pinch from a general slowdown in consumption as shoppers cut spending amid rising unemployment. To attract buyers, the retailer started its summer sale in May this year, instead of June, and launched a first-ever guest designer summer collection by Britain's Matthew Williamson.

"There's a general weakness in the retail market right now and then there's the early discounting period that's probably hitting it also," Wiklund said.

Nonetheless, he expects H&M to outperform peers during the downturn due to its winning cheap-and-chic clothing business concept.

"H&M has many qualities that will enable it to fare better than the competition," Wiklund said.

Apparel sales in Germany, H&M's top market where it generates roughly a quarter of its revenue, fell 1% last month, according to industry journal Textilwirtschaft.

In H&M's home market of Sweden, the company's fifth biggest market, June clothing sales rose 4.3%, according to the Swedish Retail Institute.

The total number of H&M stores worldwide increased by 14% to 1,827 on June 30 from 1,600 a year earlier.

This month, Karl-Johan Persson, the 34-year old son of the majority owner and grandson of the founder, took over as chief executive.

Company Web site: www.hm.com

-By Anna Molin and Ola Kinnander, Dow Jones Newswires; +46-8-5451-3091 or +46-8-5451-3097; anna.molin@dowjones.com or ola.kinnander@dowjones.com