Investors not sold on H&M revenue growth figures

Investors not sold on H&M revenue growth figures

Sweden’s H&M, the second-biggest fashion retailer in the world, has reported its steepest sales growth in three years in local-currency terms in its third quarter and said that its summer collections had been well received.

Sales before currency fluctuations were up 8% in the three months to the end of August from a year earlier. It was the fifth consecutive quarterly rise, and matched the 8% recorded in the third quarter of 2016.

“Well-received summer collections and increased market share confirm that the H&M group is on the right track with its transformation work,” said the company firm.

H&M’s shares, however, fell more than 3%.

Analysts at Berenberg, who have a sell recommendation on the shares, said growth matched expectations.

They also said that, given growth of 12% in June, as reported by H&M, it probably slowed to around 6% across July and August.

They also noted that in the year-ago period, sales were disrupted in several key markets due to troubles implementing a new logistics system.

Net sales for the retailer rose more than expected in the third quarter, by 12% to 62.6bn Swedish crowns (€5.88bn). Analysts had, on average, forecast a rise to 61.9bn crowns.

The stock has soared 51% this year on hopes that H&M is getting back on track after years of falling profits due to slowing sales at its core brand’s stores, and investments to adapt to tougher competition and changing shopping habits.

The stock is still trading at a fraction of its 2015 peak, and many analysts remain cautious, awaiting clear signs of recovery.

H&M said activity levels related to its transformation work had remained high in the third quarter, in an indication investments in physical stores and online will weigh on margins again in the quarter.

“With top-line growth fuelled by investment into price and the omni-channel proposition, we believe investors may be cautious into full third quarter numbers on October 3, where we believe leverage may be limited,” Berenberg analysts said.

- Reuters

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