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H&M same-store sales sag amid weak European sentiment

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Swedish budget fashion giant Hennes & Mauritz posted a 4 per cent drop in sales in local currencies at established stores in June, in line with market expectations amid weak European consumer sentiment.

Analysts had expected a 4.3 per cent fall in light of negative calendar effects, a strong year-ago comparison, weak overall economic sentiment and big markdowns at rivals.

They expect more gloom in the third quarter as major markdowns by competitors put sales expectations for H&M to the test.

The world No. 2 clothes retailer, after Zara owner Inditex , said total June sales, including stores opened in the past year, were up 5 per cent in local currencies, also meeting expectations.

The total, as well as like-for-like sales paths, were the worst since March, when they were up 2 percent and down 5 percent, respectively.

Analysts at Singer Capital markets called the figures awful.

“We think it is fair to assume that the UK won’t have been good,” they said in a note to clients.

Like-for-like sales at H&M, which sells the bulk of its clothes in Europe, often roughly match developments in its largest market, Germany. Clothing sales there fell 6 per cent in June, according to industry journal Textilwirtschaft.

June is the first month of H&M’s fiscal third quarter. H&M’s turnover in its second quarter was up a mere 2 per cent year on year.

An analyst who declined to be identified predicted a weak market and tough year-ago comparisons also in July and August, and said H&M may well lag a consensus expectation for a 3.5 percent like-for-like sales drop in the third quarter.

“It will be a quarter with a lot of markdowns at competitors … I think it will be difficult for (H&M) to live up to the expectations,” the analyst said.

World No.1 apparel firm Inditex has suffered less than H&M from slack European demand because of a stronger presence in fast-growing emerging markets.

Japanese apparel retailer Fast Retailing , which aims to become world No.1 with in the next 10 years, posted a drop in quarterly profit on Thursday after sales sagged following the March earthquake.

H&M, whose high street rivals also include Gap , Marks & Spencer and Next , does not release absolute sales figures monthly, only the percentage change, and does not comment on the figures.

H&M said it had 2,305 stores on June 30 compared with 2,062 a year earlier. It has stores in 40 countries and plans for 250 more stores in 2011 from 2010.

Source : Reuters

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