H&M’s revenue growth unexpectedly ground to a halt as the Swedish retailer raised prices even amid increasing competition from upstart discounter Shein and Zara owner Inditex SA.
Sales growth was flat in constant currencies, missing analysts’ estimates. The Swedish low-cost fashion retailer has been allowing prices to creep up lately, according to RBC analyst Richard Chamberlain. He said H&M’s UK prices are only 10% below average lately, while usually the retailer offers a 20% discount.
That’s even amid cut-throat competition from Shein, whose websites offer $1.20 mesh bodysuits and $2 tubetops. H&M said it prioritized profitability and reducing inventory levels during the quarter over sales growth, and it’s working to reach the goal of a 10% operating margin next year.
H&M pointed to its exit from the Russian market and lost sales in Ukraine due to the war. Excluding Russia, Belarus and Ukraine, sales growth was 8% in kronor terms, rather than 6%. The retailer, which had been operating in Russia since 2009, booked a 2 billion kronor charge last year for the wind-down.
