H&M's quarterly local-currency sales decline

Investing.com -- Stockholm-listed shares in H&M (ST:HMb) were marginally higher on Friday, as traders weighed the implications of a drop in quarterly sales at the fast fashion retailer.

Net sales from the beginning of September to the end of November decreased by 4% in local currencies versus the corresponding period last year. Analysts had seen the decline at 3.2%.

The firm had previously indicated that sales would slip by 10% in September due to unusually hot weather in Europe which hit demand for its autumn collection. When factoring this tally into H&M fiscal fourth-quarter update, sales in October and November were "in the order of" a 2% drop to flat, analysts at Citi said in a note to clients.

The world's second-largest listed fashion group behind archrival Inditex (BME:ITX), H&M has vowed to create "conditions for profitable growth" despite headwinds from budget-conscious customers reining in spending during a time of high inflation. Earlier this year, Chief Executive Helena Helmersson backed a target for the company to achieve an operating margin of 10% during its 2024 financial year.

Shares in the owner of brands like Cos and Arket have largely outperformed Inditex's stock so far this year, in a sign of investor confidence in H&M's profitability drive. However, Inditex has said that it has seen a strong start to current-quarter trading and boosted its full-year margin guidance.

"Notwithstanding an improved relative performance to [around negative 200 basis points] for the quarter, we remain cautious on [H&M] shares," the Citi analysts said.