Hennes & Mauritz Sales Miss Estimates After August Heatwave

Hennes & Mauritz AB, Europe’s second-largest clothing retailer, reported third-quarter sales that missed analyst estimates as a heat wave across parts of the region kept shoppers away last month.

Revenue excluding value-added tax rose to 28.8 billion kronor ($4.4 billion) through Aug. 31, Stockholm-based H&M said today, missing the 29.8 billion-kronor average estimate of 19 analysts surveyed by Bloomberg. Sales at stores open at least a year declined 4 percent in August, the company said, missing the average estimate in an SME Direkt survey for 1 percent growth.

Germany, H&M’s biggest market, had the 12th-warmest August since 1891 last month, while Spain and France also recorded above-average temperatures. The heat caused difficulty for fashion retailers at a time when they typically start introducing ranges for the fall. Next Plc said last week that sales in August and early September were “disappointing.”

“It was unhelpfully hot in August,” said Anne Critchlow, a London-based analyst at Societe Generale. “Monthly sales are very volatile because the weather can be different year-on-year and even the calendar can have an impact.”

H&M fell 2.2 percent to 241.7 kronor at 10:32 a.m. in Stockholm trading, the steepest intraday drop since Aug. 28 and the second-biggest decline in the OMX Stockholm 30 Index. The shares have risen 9 percent this year, underperforming larger competitor Inditex SA, whose shares have jumped 40 percent.

More Stores

Total sales for the quarter gained 6 percent, missing the average estimate compiled by SME Direkt for 11 percent growth.

The total number of outlets increased to 2,629 as of Aug. 31 compared with 2,325 last year. The retailer has focused store expansion on Asia and the U.S. to help offset a slowdown in European consumer spending as the region’s economy edges toward its second recession in three years.

H&M said the appreciation of the Swedish krona, mainly against the euro, during the third quarter resulted in large negative currency translation effects.

“While we expect third-quarter margin to be broadly flat when the company reports later this month, we remain concerned about the fourth quarter in particular where we expect to see gross margin hit” by foreign-exchange shifts, Gillian Hilditch, an analyst at JPMorgan Chase & Co., said in a report today.

The retailer will report third-quarter earnings Sept. 27.

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