H&M’s operating profit fell 19 per cent in the three months to August, marking the tenth decline in 12 quarters. Stock-in-trade rose 15 per cent. Record apparel backlogs have hit its profit. H&M’s inventories have been a persistent problem, rising steadily as the Stockholm-based fast-fashion chain failed to keep up with consumers’ tastes and was struck by logistics woes. The company is working through the excess stocks and will be able to scale back discounting as a result, even as it irons out its supply problems.
The retailer has taken the market share in most markets, largely because its new collections have been appreciated by customers. However, H&M won’t hit its sales growth target of 10 to 15 per cent this year. Online sales were a bright spot for H&M, rising 32 per cent, though the retailer still may struggle to reach its target for a full-year increase of at least 25 per cent because first-half e-commerce missed that level.
Weakness among clothing retailers has pitted them in a battle to lower prices. Sales at Gap, discount-clothing retailer Primark and Esprit have been under pressure, and Inditex reported its weakest sales growth in four years this month.