H&M sales grew 4% in November

H&M sales grew 4% in November

Swedish fashion giant H&M has booked a double-digit rise in fourth-quarter sales, but blamed unseasonably mild weather for contributing to a slowdown in November sales growth. 

Sales including VAT increased 9% in local currencies during the three months to 30 November. Converted into SEK, sales including VAT grew 14% to SEK56.48bn (US$6.7bn) from SEK49.66bn in the same period a year ago. Excluding VAT, sales reached SEK48.69bn, up 14.2% from SEK42.64bn last year. 

For November, group sales, including VAT, increased 4% in local currencies, compared to the same month last year. This was below October's 12% rise, and below Reuters analyst expectations for 9% growth. 

H&M blamed the slowdown on unseasonably mild weather in North America and in many of its large sales markets in Europe.

This is the second time the company has recorded single-digit growth this year, after sales climbed 1% in August – its weakest growth in more than two years. 

H&M opened 117 new stores during the month, taking its total count to 3,924 as of 30 November, up 413 stores from 3,511 in the prior year period. 

The retailer will report its full-year results on 28 January. 

Stifel analyst Richard Jaffe believes the company's store openings were skewed towards the last week of the year, "and we believe this negatively impacted EPS as these stores incurred costs (rent) while they were not open and thus not generating sales."

He also notes that the increasingly strong USD exchange rate "has resulted in increased purchasing costs in 2H (more than we saw in 2Q) compounded by increased wages. Despite the increased costs, we believe H&M did not pass the cost increases on to their customers in order to be the lower-cost provider and gain market share. We view this as the correct strategy for the company but acknowledge the near-term pressure on earnings."