H&M has missed sales expectations after admitting that its drive to tighten stock levels left parts of the business unable to meet customer demand.
The fashion giant posted net sales of SEK 54.8bn (£4.2bn) for the three months to 31 May, down from SEK 56.7bn a year earlier.
Sales in local currencies were broadly flat, with H&M operating around 3 per cent fewer stores than the same period last year.
Operating profit came in at SEK 5.9bn (£463m), flat year on year and below analyst expectations, while profit excluding one-off costs rose 11 per cent to SEK 6.6bn.
H&M said it had taken SEK 679m of restructuring costs during the quarter as it pushed ahead with organisational changes across its sales markets and central sales teams.
Chief executive Daniel Ervér said the retailer’s “long-term work” had strengthened profitability, but admitted sales were “somewhat lower than planned”.
He said: “The tighter inventory management has, however, in some cases affected our ability to fully meet demand. Our assessment is that there is potential to further increase precision in order to create a better balance between availability and demand.”
H&M’s stock-in-trade fell 10 per cent year on year to SEK 34.9bn, as the retailer sought to reduce excess stock and protect margins.
Gross margin improved to 56.6 per cent, up from 55.4 per cent last year, helped by supply chain improvements and lower stock pressure.
The retailer continued to reshape its store estate during the quarter, with 163 fewer stores than a year earlier. It opened its first H&M store in Rio de Janeiro and reopened its Stockholm flagship on Hamngatan.
H&M said online now accounts for just over 30 per cent of sales.
The update comes as the Swedish retailer continues to face fierce competition from Zara owner Inditex, fast fashion rivals including Shein, and resale platforms such as Vinted and Depop.
H&M said June sales are expected to be broadly in line with the same month last year.
Click here to sign up to Retail Gazette‘s free daily email newsletter
