GO
Loading...

H&M Sales Disappoint, European Consumers Wary

Swedish fashion chain Hennes & Mauritz said sales rose 14 percent in November, year-on-year, lower than expected by analysts and the latest in a series of signs that European consumers were getting wary of inflation and debt.

The Swedish retailer, one of the world's biggest fashion chains, said sales for comparable stores -- outlets open at least a year -- were up 1 percent in November.

H&M shares slipped 2.6 percent.

A poll of 10 analysts by Reuters had forecast a rise of 14.9 percent according to the average figure with a median of 15 percent. Like-for-like sales were seen up 2.8 percent.

Retail sales in Europe have been hit in recent months by uncertainties caused by an ongoing credit crunch and by the long-term effects of the subprime mortgage problems in the United States.

"I think consumers are getting increasingly savvy. I think people are hanging back waiting for better sales, for deeper discounts," Tim Denison, director of knowledge management at SPSL, part of global market research firm Synovate, told "Worldwide Exchange."

Gloomy Prospects

Growth prospects are looking gloomier and shoppers are more hesitant. Retail sales fell 0.7 percent in October, the latest month for which figures are available, rising 0.2 percent year-on-year.

"Things look more difficult as we look into 2008," Denison said.

Debt was a big factor in consumers' decision to cut back on shopping, he said.

"We're still seeing about one in ten adults carrying debt from their Christmas shopping spree last year," Denison added.

Germany is H&M's biggest single market and figures from industry body Textilwirtschaft show clothing sales dipped 4 percent in the month. Figures from the Swedish Retail Institute showed clothing sales up 0.5 percent.

Rival Inditex, owner of the Zara and Massimo Dutti chains, has also felt the effect of slower consumer demand, disappointed analysts earlier this month by reporting sales in the year to end-October lower than expected.

In Britain, retailers had to come up with big discounts to lure customers in shops ahead of Christmas, as the gloom seems to be spreading.

"2007 has seen more discounts than any year in memory," Kevin Hawkins, from British Retail Consortium, told "European Closing Bell."

"People are now coming out to do their Christmas shopping very belatedly," Hawkins added.

Designer Collection Boost

H&M, which does not give sales in currency figures and does not make any comment, has seen its shares rise around 9 percent this year, just underperforming Inditex.

While its main markets were weak, H&M got a small boost from the collection by Italian designer Roberto Cavalli, one in a long line of catwalk designers, including Karl Lagerfeld, Stella McCartney and Viktor & Rolf, to produce one-off collections for H&M.

The collections make up a fraction of sales, but draw shoppers into stores and underscore the retailer's boast of bringing catwalk fashions to the sidewalk.

Cavalli's line went on sale on Nov. 8 with eager shoppers queuing up at stores for clothes by the "king of animal prints".

"I think the Cavalli effect was quite modest," said a second analyst. He said that the Cavalli collection was only available in 200 stores compared to 800 for Lagerfeld.

"(But) you shouldn't underestimate the media effect," he added. "It is an event that strengthens the brand."

Cavalli also designed the costumes for the current come-back tour by British band The Spice Girls.

Sales over H&M's full financial year, which runs from December to November, were up 17 percent with like-for-like sales up 5 percent.

In 2006, full-year sales rose 11 percent with same-store sales 2 percent higher.

The retailer had 1,522 stores open at the end of November against 1,345 a year earlier.

-- Reuters contributed to this report

Featured