Swedish fast fashion brand H&M’s revenue growth slowed down by about one per cent this month, the slowest pace in more than a year. Markdowns eroded third-quarter profit margins by 1.1 percentage points. Europe’s second-largest fashion retailer plans to introduce two brands next year. The earnings outlook for next year will be helped by a gradual reduction in the pace of investment, which has been higher than normal as it prepares the new brands and adds online shopping.
H&M monthly sales have been disappointing more often than not over the past year. Pretax profit fell 9.1 per cent in the third quarter, which ran through August. Inventory surged 24 per cent, mostly due to unsold autumn wear, and that position is expected to improve. The company plans to add e-commerce in eleven markets and open 425 net new stores this financial year. In 2017 H&M intends to open stores in four to five new markets, including Colombia, Iceland and Kazakhstan.
Europe’s fashion retailers have been suffering lately from an unseasonably warm end to summer and a lack of compelling fashion trends. Business conditions are close to a recession. Price competition in the industry is escalating H&M feels the need to continue cutting prices in the fourth quarter following a weak start to the autumn season.