By Anna Molin
STOCKHOLM--Swedish clothing chain Hennes & Mauritz AB
(HM-B.SK) Thursday posted lower sales in October at stores open for
at least a year, with analysts citing a slump in sales in its
biggest market Germany and intensifying price wars among
fast-fashion retailers.
H&M, the world's number two retailer after Zara-owner
Inditex S.A. (ITX.MC), said sales at comparable stores fell by 5%
in October, a sharp decline from the 6% increase in the previous
month and below forecasts for a 0.1% rise. H&M said total
October sales in local currencies increased by 4%, down from a 15%
sales jump in September and below the 9.6% increase seen by
analysts. October included one weekend less than last year.
Analysts pointed to likely weaker sales in Germany, where
H&M derived nearly 22% of sales in the nine months to Aug. 31.
According to statistics from trade magazine TextilWirtschaft, the
German clothing market contracted by 4% in October from a year
earlier, following a 5% sales increase in September.
"The most worrying thing is that November sales might not be any
better because the first two weeks of November have also been weak
in the German clothing market," Societe Generale retail analyst
Anne Critchlow said.
An H&M spokeswoman declined to comment.
German apparel sales in the week ending Nov. 4 dropped 2%
compared with the same week in 2011, according to TextilWirtschaft
and the slide continued in the week ending Nov. 11, with clothing
sales down 5% on the year. The so-called "young fashion" segment
targeting teenagers to people in their early 20s, a key focus for
H&M, saw the biggest decline, down 11% on the year in the
second week of November.
Retailers had been expecting a rise in clothing sales due to
colder weather.
Data Thursday confirmed a slowdown in German economic growth in
the third quarter when gross domestic product expanded by 0.2%,
down from 0.3% in the second quarter and 0.5% in the first three
month of the year.
A slowdown in the euro zone's biggest economy would be a severe
blow to European retailers already suffering from sluggish consumer
spending in much of the rest of Europe. H&M, known for its
cheap-and-chic duds, also faces increasing pressure from discount
retailers like Primark, and U.S. chain Forever 21 opening more
stores in core markets like the U.K.
"We're starting to see even more competition in the value space
where H&M is competing... that sector is really where the
fierce competition is right now," Jamie S. Merriman, analyst at
Bernstein Research, said.
H&M has previously fought back against increased low price
competition by cutting prices further, causing some investors to
complain the company is sacrificing margins to gain volume and
market share. Ms. Merriman said she wouldn't be surprised if
H&M again lowered its prices to up its competitiveness.
-Write to Anna Molin at anna.molin@dowjones.com; Twitter:
@DowJonesNordics
(Sarah Sloat contributed to this report.)
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