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Bloomberg
Hennes & Mauritz AB (H&M) revenue growth showed a slowdown in April and May, stymieing the Swedish clothing retailer’s attempts to reduce a buildup of inventory that’s been weighing on earnings.
Sales in the latest quarter were above analysts’ estimates as compiled by Bloomberg News. But the figures suggest growth slowed to 5.5 percent in April and May from a 7 percent rate in March, wrote Fredrik Ivarsson, an analyst at Kepler Cheuvreux. That suggests stock-in-trade probably increased 4 percent in local currencies at the end of May, said Ivarsson, who estimates earnings were flat for the quarter. The shares fell 1.8 percent in Stockholm, having earlier dropped as much as 3.1 percent.
Clothing retail has been a difficult market lately, with Inditex SA reporting weak sales recently due to rainy and cold weather and Gap Inc. suffering a 10 percent drop in revenue at its namesake chain. H&M, which had pledged to reduce discounts, said turnaround initiatives are starting to work, though challenges remain. The biggest of those is that backlogs are standing near the equivalent of a fifth of total revenue.
“We expect inventories to remain high at end of second qu-arter,†wrote Richard Chambe- rlain, an analyst at RBC Europe.