Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.

Two big retailers have laid bare just how bad the clothing market really is.

Hennes & Mauritz, the Swedish fast-fashion chain that operates H&M stores throughout Europe and the U.S., suffered its weakest sales growth in three years in the second quarter. March and April were "significantly below" forecasts after unseasonably cold weather, it said Wednesday.

All Wet
An unusually wet and wintry Europe hit H&M's sales growth
Source: Bloomberg Intelligence

Meanwhile, same-store sales turned negative in the 15 weeks to June 11 at Debenhams, the British department store chain, as the hit from the poor weather was compounded by a knock to consumer confidence from the looming referendum on whether the U.K. should leave the European Union.

Debenhams shares had their worst day this year while H&M's fluctuated. Both maintained their discount, measured by their forward price-to-earnings ratio, to their peers. Their outlook is softer than for some big rivals such as Inditex, owner of the Zara clothing store chain, so that discount looks justified.

H&M is more exposed than Inditex to the dollar's strength as it buys about 80 percent of its stock from suppliers in Asia, who are paid in dollars, compared with about 35 percent for Inditex. The company said the stronger greenback will continue lifting its costs in the third quarter.

It also said stock at the end of the second quarter was up 29 percent from a year ago, and now accounts for 13.7 percent of sales, compared with 11.8 percent previously. That surplus, which it partly attributed to weaker-than-expected sales, suggests further markdowns to come that could heap pressure on profits.

Deserved Discount
H&M and Debenhams' softer outlooks justify their lag to big rivals and the broader market
Source: Bloomberg Intelligence

As for Debenhams, it has already moved into its sale period. So even if a vote for Britain to remain in the EU helps revive consumer spending, or if there's a heatwave that lifts demand for summer clothing, the full effects won't fall through to the bottom line of the current period. Neither M&S nor Next have begun their sales, so they could benefit more from a late boost in spending. 

In addition to the factors that were important in the current period, both H&M and Debenhams highlighted a general weakness in the clothing market over the last few months. As Gadfly has noted, women are simply buying fewer clothes. 

A clothing Armageddon has hit Europe and the U.S., and prospects for retailers hinge on their response.

Inditex is doing well here. Though sales are still growing strongly, it's nevertheless recognized that it should expand its store base more gradually to lower its costs.

Both H&M and Debenhams recognize they need to address the challenging conditions. H&M is investing in the growth of new brands such as Cos and & Other Stories. That's unusual for a clothing retailer, that's normally more concerned with cutting costs than actually trying to take sales in a difficult market. But it's the right thing to do because when women buy fewer clothes, they will be increasingly choosy when they do so, and these ventures tick both the style and value boxes.

The strategy looks to be paying off, as both brands are doing well. But H&M still faces challenges at its core chain, which is battling against discount rivals such as the ever-expanding Primark.

Debenhams, meanwhile, is trying to tackle a surplus of selling space by filling this with outside brands and restaurants. But incoming chief executive Sergio Bucher should go further, and look at whether he needs so many stores in the first place. 

Debenhams has been expanding retail space even as demand for womens' clothing declines
Source: Bloomberg Intelligence
2015 includes 160 UK owned stores

He needs to do this soon, because the company is already seeing a downturn in clothing sales across Britain. The company said today that across Britain, clothing sales fell 4 percent in the 12 weeks to May 8. It said its market share was flat during the period, but that's a fine line to be treading in a difficult market and when their broader sales are down. Investors are right to be cautious.  

While the rain and referendum may come and go, the shift in women's shopping patterns looks set to stay for a while.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andrea Felsted in London at

To contact the editor responsible for this story:
Jennifer Ryan at