September 17, 2012 / 6:14 AM / in 5 years

H&M August sales hit by warm weather

STOCKHOLM (Reuters) - World no.2 fashion retailer Hennes & Mauritz (HMb.ST) on Monday posted an unexpected drop in like-for-like sales in August, blaming a heatwave in key European markets for keeping customers away from stores.

The Swedish budget apparel firm, which trails Zara owner Inditex (ITX.MC) by value and turnover, as well as by the number of markets and stores, said sales at stores open a year or more shrank 4 percent in local currencies in August, well below a Reuters poll forecast for 1 percent growth.

“It was primarily the extreme heat wave in a number of European markets in August that affected sales negatively,” H&M said in a statement.

DNB Markets analyst Haakon Aschehoug, who rates the stock a “hold”, said the figures probably meant H&M, which has the bulk of business in Europe, lost market share in the month.

“We already know the (apparel sales) numbers from Sweden and Germany, and the U.S. retail sales. This represents, in our view, an underperformance on the key markets of about 4 percent.”

H&M said its total sales in August, the last month of the fast-expanding firm’s fiscal third quarter, were up 6 percent from a year earlier, lagging the mean forecast for an 11 percent increase.

H&M has more than 2,600 stores in 44 markets across Europe, Asia and North America. In Germany, H&M’s biggest single market, apparel sales dropped 2 percent in August, according to industry data.

“The trend we’ve seen the past months has been H&M outperforming the market. That took a pause in August ... We will watch this closely going forward,” Aschehoug said.

H&M said that, in its full third quarter, a strong appreciation of the Swedish crown, mainly against the euro, led to large negative currency translation effects.

Turnover in the June-August quarter grew 7 percent from a year earlier to 28.8 billion crowns ($4.4 billion), undershooting expectations for a 9 percent rise to 29.5 billion.

H&M’s regular quarterly earnings report is scheduled for September 27.

So far this year, H&M and Inditex have proved more resilient than rivals to the eurozone crisis and challenging fashion retail markets.

In its second quarter, H&M grew profits more than expected helped by its low-price focus, easing input prices and a broadening geographic footprint.

($1 = 6.5419 Swedish crowns)

Reporting by Stockholm Newsroom; Editing by Louise Heavens

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