H&M struggles to achieve sales growth in Q4

The Swedish fashion retail giant, H&M Group, gave an update on its fourth quarter and full-year performance on Friday. As per the announcement, net sales for the quarter from 1 September to 30 November were slightly up, amounting to SEK62.629 billion. This compares to SEK62.433 billion in the same period a year earlier.

However, when Russia and Belarus sales are removed from the equation, there was a 3% increase in SEK; but any gains would have been negated by inflation, resulting in a 1% drop in local currencies. Furthermore, compared to the same period in the previous year, the group’s net sales fell by 4% in local currency terms — a bigger drop than the 3% decline anticipated by analysts.

For the entire year, beginning 1 December 2022, net sales rose by 6% to SEK236 billion. Discounting Russia and Belarus, there was an 8% growth in SEK and a 1% increase in local currencies.

All these figures are provisional and a complete breakdown of sales performance, margins, costs, and profits will be available with the full-year results at the end of January. The company has been focusing on improving margins, which might explain the lukewarm sales performance.

Inditex, another fashion retailer, similarly witnessed a slowdown in its latest quarter. Nonetheless, Inditex's sales grew by 6.6% in Q3 and store and online sales increased by 14% YoY between 1 November and 11 December.

Given that both H&M and Inditex together operate approximately 10,500 stores worldwide, their performance is reflective of the global fashion industry. The extreme weather conditions across Europe, combined with the cost-of-living crisis that impacted their smaller rivals in late summer and early autumn, are all likely to have adversely affected both these companies.

The abnormal weather conditions included extreme heat in some parts of Europe and lack of sunshine in others, impacting summer season sales. People's expectations of chilly weather prompting autumn collections to drop in-store were also upset by pleasant, sunny conditions, leading to a slump in sales of coats, knits, and boots.

Moving forward, we hope 2024 would better align with the industry’s long-term planning, with each season performing as expected.