H&M share price slides as discounts reduce profit

Shares in H&M fell by nearly 6% after the boss of the world’s second-largest fashion retailer warned that the company is falling short of its sales targets, with hefty summer discounts reducing quarterly profit by 20%.

H&M share price slides as discounts reduce profit

H&M faces rising competition in its core European budget fashion market, including from young shoppers defecting to online retailers such as Asos and Zalando.

“The fashion retail sector is growing and is in a period of extensive and rapid change as a result of ongoing digitalisation,” the Swedish retailer’s chief executive Karl-Johan Persson said.

“Our growing online sales did not fully compensate for reduced footfall to stores in several of our established markets, which has resulted in our total sales development not reaching our targets so far this year.”

H&M will trim its target for net store openings this year to 385 from around 400, it added, having added 418 in the 12 months to the end of August to make a total of 4,553 worldwide.

H&M offered deeper summer discounts to clear inventory this year, squeezing its gross margin to 51.4% from 54% a year earlier, yet levels of leftover garments still grew in the quarter to the end of August.

Shares in the second- biggest fashion retailer after Zara-owner Inditex were down 5.6% at one point yesterday afternoon.

Meanwhile, the Irish arm of retail chain Flying Tiger Copenhagen yesterday confirmed that 2017 has been a strong year as it continues to expand here.

That is despite new accounts showing that the company recorded a 28% decline in pre-tax profits last year to €1.33m.

Tiger Retail Ireland Ltd is 50% owned by husband and wife team Gillian Maxwell and Niall Stringer, with the remainder owned by Danish parent Zebra.

Tiger’s Irish revenues increased by 12.5% to €15.75m last year, paying a dividend of €1m.

A company spokesperson said: “We expect to continue our expansion in 2018 with a number of new stores planned and particularly focused in the south-east. 2017, to date, has been strong and we look forward to a really good fourth quarter.”

Additional reporting: Reuters

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