Blog: Leonie BarrieStock cuts hurt H&M

Leonie Barrie | 28 September 2009

Swedish fashion retailer H&M Hennes & Mauritz last week posted a better-than-expected rise in third-quarter net profit, but disappointed analysts with an 11% dip in August same-store sales as shoppers curbed their spending and sought discounts. Analysts also wondered if management had expected worse sales for the quarter after admitting they ran out of stock in certain key items. 

The world's third-largest fashion chain by sales said group profit after tax climbed 3.9% to SEK3.46bn (US$506m). Sales excluding VAT rose by 13% to SEK23.55bn in the three months to 31 August.

H&M said it plans to open even more stores this year than earlier forecast, and is joining the battle for online customers with a UK website due to open for business in autumn 2010.

Its results coincided with the release of a report that highlights the value clothing sector as one of the leading lights in the pan-European apparel industry.

The internet is also a focus for US department store retailer Sears, which is to sell products from other retailers on its website as part of a new online mall called Sears Marketplace – in a move that mirrors one taken by Wal-Mart Stores earlier this month. The new online store is thought to have been prompted by weak sales at Sears, and will help merchants expand their online visibility while bringing a wider selection of products to customers.

The sportswear market might be big business in the UK, but its leading retailers continue to have a tough time as competition heats up and shoppers rein in discretionary spend to focus on more essential items.

Embattled UK outdoor apparel retailer Blacks Leisure has appointed administrators to its boardwear unit Sandcity, which operates 11 O'Neill stores across the UK, and is looking at a range of restructuring options for the group as a whole. It also expects to breach a financial covenant this month.

And sporting goods retailer JJB Sports has announced spiralling losses of GBP46.0m (US$74.4m) for the first half of the year after being on the brink of administration earlier in the period. Revenues tumbled 42% to GBP178.6m, but the firm said it is confident that restructuring moves will eventually pay off.

There was some good news for lingerie firm Intimas Group Plc, whose brands include Charnos and Lepel, which has been bought out of administration by textiles maker Linwood Fabrics Ltd.

The sale of a "significant part of the business," including the two brands, safeguards 55 jobs. However it also leaves administrators reviewing the remaining operations, with redundancies likely amongst the 150 staff. 

Problems of a different nature are facing VF Corporation subsidiary The North Face after the US Environmental Protection Agency (EPA) filed a lawsuit against the firm for making “unsubstantiated” claims about the antimicrobial properties of some of its footwear. The company says the dispute over an 'Agion' silver treated footbed relates to claims made about the product and not the product itself.


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