Published: Wednesday, 15 Jul 2009 | 3:33 AM ET

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Swedish fashion chain Hennes & Mauritz reported on Wednesday a bigger than expected 5 percent year-on-year fall in sales at established stores in June.

The average forecast given in a Reuters poll of 10 analysts had been for like-for-like sales to drop 1.7 percent.

Total sales were up 4 percent, well below an average forecast of an 8.3 percent rise.

H&M, which has over 1,800 shops in more than 30 countries, only gives round numbers for sales and does not give currency figures.

"These are some disappointing sales figures for June. It seems the market is still tough, it seems H&M and the whole retail business is having very intense competition, and it seems the price pressure has continued in June," said Soren Lontoft Hansen, analyst at Sydbank.

"But I think this will ease off as we go into the fall ... and that will benefit H&M."

Sharon Lorimer

Europe's retailers are struggling with the worst economic downturn since the Second World War. Though there have been some signs recently that consumer sentiment is starting to improve, a recovery is far from assured.

H&M and Spain's Inditex, Europe's biggest clothing retailer which owns the Zara chain, have so far shown themselves as weathering the downturn better than mid-market rivals such as Britain's Marks & Spencer and Next, helped by their focus on low-cost, fast-moving fashions, and their geographic spread.

H&M in late June reported forecast-beating fiscal second-quarter profits and said currency swings were becoming less costly.

But like-for-like sales in May, the last month of the quarter, fell a bigger than expected 9 percent while total sales were unchanged from a year earlier.

H&M last month signed up luxury shoe maker Jimmy Choo as the latest in a string of high-profile guest designers.

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