H&M reports fastest quarterly sales growth in three years
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H&M reports fastest quarterly sales growth in three years

Swedish fast fashion giant Hennes & Mauritz AB (H&M) reported quarterly earnings this week, and while the figures were good, analysts’ uncertainty led the share price down. The company saw its fastest quarterly sales growth in three years, but many analysts were curious as to whether this growth was spurred on by the deep discounts the company was offering in store – and the extent to which those discounts could damage H&M’s bottom line. Ultimately, we won’t find out the answer to these questions until January 31, when the company reports its full results.

Analysts’ uncertainty led H&M’s share price down on the back of results – but it’s still up by 7% over the past six months

graph 19 hm

Source: Yahoo Finance

To be clear, the only solid data that H&M released was overwhelmingly positive – and a number of observers might feel that this is cause for celebration. The reason that the wider market is reacting more cautiously comes down to the possible effects of deep discounting. On the one hand, with reports that the company has been selling sweaters as cheaply as $9.99, some analysts have questions about the impact that slashed prices could have on what is otherwise impressive sales growth. On the other hand, RBC Capital Markets analyst Richard Chamberlain has questioned how easy H&M will find it to put prices back to normal for the festive period.

For the three-month period running through November, H&M beat analysts’ expectations on revenue. Year on year, it rose by 12% to 56.4 billion kronor ($6.2 billion), beating out the Street’s predictions of 56.1 billion kronor. H&M was facing a relatively weak comparable quarter, and half that growth was down to currency effects, but the fact remains: for now, it’s undeniably a win.

Disclosure

Dominion holds Hennes & Mauritz in its Global Trends Luxury Fund.


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