H&M Sales Grew 10% In The First Quarter, Anticipation Of Market Concerns And Profitability.

H&M Hennes & Mauritz AB (HMb.ST) Haines Maurice group's sales figures that met market expectations in the first quarter were still not enough to ease investors' concerns about their profit margins and inventory levels. The share price of the world's second largest apparel retailers fell by 5.9% on Friday.

In the first quarter of 2019 fiscal year ended February 28, 2019, net sales of Hennes & Mauritz AB increased from 46 billion 181 million Swedish kronor to 51 billion 15 million kronor in the same period last year, up 10% over the same period last year, better than 8% of market expectations, and the growth rate calculated at local exchange rate narrowed to 4%, slower than 6% in the four quarter, but has been increasing for third consecutive quarters.

Richard Chamberlain, an analyst at RBC plus capital market, estimated that the group had a "very slight" increase in its same store last quarter, while analysts estimated growth in the four quarter was 3%.

"We believe that H&M is making progress on the road to recovery," Richard Chamberlain wrote in today's Research Report. It also points out that the reason for the weakening of share prices is likely to be that some investors have higher expectations for sales in February.

Its largest competitor, Zara Inditex SA (ITX.MC) India Textile Group said this week that in the first five weeks of the new fiscal year from February 1st to March 9th, the total sales of stores and online sales increased by 7% on the basis of local exchange rates.

Last year's sales and profit growth of the world's largest apparel retailer hit a five year low. The slowdown also triggered investors' selling.

Jefferies Group LLC analysts believe that Hennes & Mauritz AB stimulates customers to increase online shopping through online shopping and return free policies, which helps sales grow, but at the same time it will seriously dilute profits. Therefore, the profit margin of the first quarter will continue to decline significantly.

The gross profit margin of the group fell by 130 basis points to 52.7% in the fiscal year, and the gross margin of Inditex SA Indo Textile Group rose by 39 basis points by 56.7%.

The latter expanded the scale of electronic sales and key integrated lines, while reducing the size of new retail areas.

RBC and Canadian capital market recently pointed out that the online business growth of Inditex SA Indo Textile Group and Hennes & Mauritz AB and other traditional retailers has already outperformed the pure electric business of their peers.

Richard Chamberlain predicts that the inventory level of Hennes & Mauritz AB is still high in the first quarter, but after the past few seasons' sales promotion and the management's efforts in upgrading logistics, supply chain, digital technology and store concept, the proportion of new products in the inventory will be raised.

Hennes & Mauritz AB also pointed out in January this year that the discount rate in the first quarter will be improved by one percentage point over the same period last year.

H&M Hennes & Mauritz AB (HMb.ST) reported 136 Swedish Swedish kronor on Friday, a 4.9% decline in the whole day, narrowing its growth to 67.9% in 2019.

Richard Chamberlain has recently upgraded its rating to "industry consensus", and Jefferies Group LLC has also held a rating of "holding".

Author: Lin Biying