H&M gets punished for strong growth

Swedish fashion chain H&M has released a stellar report for the past quarter, but despite its record growth the group is punished by the stock market, which believes H&M’s discounts are not sustainable.

Super discounts

H&M managed to lift its turnover by 12 % to 56.4 billion Swedish krona (5.5 billion euros), slightly more than the 56.1 billion krona expected by analysts. This growth is the strongest quarterly growth in three years’ time.

Nevertheless, investors responded less than enthusiastically, especially in the wake of the profit warning Asos issued on the same day, which cast a dark shadow over the entire fashion industry. Investors fear that H&M’s growth is not sustainable and came at the cost of profit, as the fashion group had to give massive discounts in November.

Currency effects

Analysts are also pointing out that the same quarter last year was very weak and makes for a poor basis for comparison, or at least one that is too easy. In addition, half of the group’s growth is due to favourable currency effects: without those, turnover growth would have stranded at 6 %.

H&M’s complete results and the impact on underlying profits will be announced on January 31st, along with a full annual report.