H&M’s Quarterly Revenue Growth Halted by Large Summer Discounts

The Swedish fashion chain Hennes & Mauritz (H&M) announced on Friday that due to large summer discounts, it recorded only a slight revenue growth in the third fiscal quarter, although it highlighted a good start to the sales of the autumn collection.

H&M is the second largest clothing retail chain in the world, after the Spanish Inditex. Today, they reported that in the quarterly period ending in August, they achieved five percent higher net revenues than in the same period last year, amounting to 51.2 billion Swedish kronor, or 6.4 billion dollars.

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Expressed in local currencies, their revenues increased by four percent.

– The quarterly sales were significantly impacted by a much larger summer sale compared to the same period last year, both in terms of the number of items and the average discount per item. This has hindered revenue growth, the company explains.

Among the positive factors, they highlighted improved inventory levels ahead of the fourth fiscal quarter thanks to large summer discounts, which paved the way for a good start to the sales of the autumn collection.

The Swedish fashion chain has launched several independent and mostly more luxurious brands in recent years to expand its customer base in light of increasing competition in the main segment of affordable clothing lines. Despite this, the H&M chain still generates the lion’s share of their revenues.

Analyst at Societe Generale bank Anne Critchlow interprets that such structural challenges, particularly the rapid shift to online sales in the youth fashion segment, adversely affect H&M’s operating margin and sales in stores that have been open for more than a year.

– Sales in stores open for more than a year are suffering due to insufficiently quality online offerings. In most countries, online sales have not yet been integrated with physical stores and do not include the option of free delivery and free returns of purchased items, Critchlow notes.

H&M will publish its complete business report for the third fiscal quarter on September 28.