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Jan 15, 2016
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H&M December sales up 10 pct, more than expected

By
Reuters
Published
Jan 15, 2016

Swedish budget fashion retailer said on Friday sales rose 10 percent in December in local currencies from a year earlier, above a mean forecast for an 8 percent rise in a Reuters poll of analysts.

H&M


Local currency total turnover in December, including the crucial Christmas period, rose 10 percent from a year earlier, against a forecast 8 percent in a Reuters poll of analysts.

The pace in December, the first month of H&M's fiscal 2015/16 year, was more than twice as high as in November, although compared with a year earlier, growth slowed.

The sales figure includes newly-opened stores and is not a like-for-like comparison.

As in 2014, an unusually warm autumn has dented many fashion chains' sales of winter garments, and temperatures stayed unexpectedly high in many of H&M's key markets in December as well.

"It .. certainly looks good relative to most competitors in a difficult December for clothing retailers, also bearing in mind H&M's strong prior-year comparative," said Societe Generale analyst Anne Critchlow. "It's the first upside surprise on trading for at least 4 months".

The news sent H&M's shares up 3 percent, although analysts cautioned the sales growth risked being boosted by large markdowns, which would further dent gross margins already under pressure from large investments and purchase costs.

H&M, which does the bulk of its business in Europe, did not comment on its December figure. Whether sales were helped by markdowns, the opening of a large number of new stores in November or well-received new collections will likely remain unclear until its first-quarter report.

"We estimate like-for-like sales growth of 0.5 percent - which is better than expectations but not as high as we think H&M would need in order to leverage fixed-cost growth," said Bernstein analyst Jamie Merriman.

"The other question ... is how much of that will be driven by promotion given the warm November and what will the corresponding effect be on margin," she said.

In Germany, H&M's single-biggest market, the clothing sector was down 1 percent in December, according to industry data.

Rivals that have reported weak pre-Christmas sales include American GAP and Britain's Next and Marks and Spencer.

Biggest rival Inditex, with Zara its largest brand, has reported a relatively strong 15 percent increase in local currency sales from Nov. 1 to Dec. 3 but has yet to open the books on the Christmas season.

H&M's full-year 2014/15 report, due on Jan. 28, will show whether markdowns have hit fourth-quarter results following slower than expected sales in the period.
 

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